The first Bitcoin-linked exchange-traded fund has launched in the US, marking a new milestone in cryptocurrency’s ongoing journey toward the financial mass market.
ProShares, an investment management firm, is launching the ProShares Bitcoin Strategy ETF, which will be listed on the New York Stock Exchange under the ticker BITO starting Tuesday. Though it offers retail investors a novel channel for cryptocurrency exposure — and one that may seem less risky than buying it directly — it’s more of an evolutionary step than a revolutionary one. In short, you can’t buy Bitcoin from your stockbroker yet.
“BITO will open up exposure to Bitcoin to a large segment of investors who have a brokerage account and are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider,” ProShares CEO Michael L. Sapir said in a statement on Monday.
Though the regulatory environment for Bitcoin and cryptocurrency remains murky, the Securities and Exchange Commission’s approval of ProShares’ ETF shines some light on how it’s thinking. Below, we outline the details of the new ETF, what it means for investors and what it suggests about crypto’s relationship with conventional financial markets.
No. You’re buying a share of an exchange-traded fund, which is a fund that tracks another asset. In this case, the ETF is actually tracking a futures contract — an agreement to buy or sell an asset in the future at a specific price — and the asset is Bitcoin.
“The new Bitcoin ETF will not hold any actual Bitcoins but will rather model the price of Bitcoin using futures contracts and other short-term financial instruments,” said Dr. Richard M. Smith, financial risk expert and author of The Risk Rituals newsletter. “The SEC isn’t ready yet to approve an exchange-traded ETF that holds actual Bitcoins.”
Yes. ProShares said that investors will be able to buy shares of ProShares Bitcoin Strategy ETF starting Tuesday. Before launching the fund, the company said the ETF had net assets of $20 million and that shares would begin trading at $40.
Is cryptocurrency coming to Wall Street?
The SEC green-lighting this ETF marks an important, though modest, step for mainstream acceptance of Bitcoin as an asset class. That noted, the SEC and its chairman Gary Gensler is on record saying “we just don’t have enough investor protection in crypto finance, issuance, trading, or lending.”
The price of Bitcoin rose higher than $60,000 over the weekend — just a few thousands shy of its historical peak in early April 2021, when Coinbase went public.
Still, experts believe that there will be more intermingling between crypto and institutional and retail investors, as well as more experimentation embedding crypto into traditional financial instruments like ETFs.
“The entire global economy is moving towards decentralization. The fact that the SEC didn’t raise any objections bodes well for future innovation in the cryptocurrency space,” said Dr. Sarah Manski, assistant professor at George Mason University’s School of Business.
Is the SEC changing its stance toward cryptocurrency regulation?
The SEC has signaled its wariness of cryptocurrency. Earlier this year, Coinbase’s crypto-lending program, Lend, was scrapped after the SEC threatened to sue. The launch of ProShares’s ETF could mark a turning point in how the SEC approaches regulating crypto-related securities.
“The US government must adopt a new set of regulatory policies that embrace the future and encourage innovation,” said Dr. Manski. “I see members of Congress focusing more and more on these issues and consulting with blockchain experts on the best policies to encourage economic growth and financial inclusion in an increasingly digital world.”
Aside from ProShares Bitcoin Strategy ETF, other Bitcoin-related ETF applications, such as Valkyrie Bitcoin Fund, are currently under review.
“The launching of a Bitcoin ETF is only the latest chapter in an ongoing broad acceptance of the new economic opportunities this technology will provide,” said Dr. Smith.
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