For the first time ever, Bitcoin will begin trading on the New York Stock Exchange (NYSE) as an exchange-traded fund (ETF) following the approval of Proshares’ ETF which will operate under the ticker symbol ‘BITO’. The ETF will invest primarily in bitcoin futures contracts and will not directly invest in bitcoin.
According to the company, BITO can be bought and sold like a stock and doesn’t require investors to hold an account at a cryptocurrency exchange or to have a crypto wallet. Says ProShares CEO Michael Sapir said in the statement, “We believe a multitude of investors have been eagerly awaiting the launch of a bitcoin-linked ETF after years of efforts to launch one.”
How is a Bitcoin Futures ETF different?
According to CNBC, before this recent approval, at least 10 asset managers have sought approval to launch spot bitcoin ETFs, which would give investors a vehicle through which to buy bitcoin itself, rather than derivatives tied to it. They were all rejected by the Securities and Exchange Commission with the excuse that none of them was able to show the market is resistant to manipulation.
Investing in a futures-based ETF would not be the same thing as investing directly in bitcoin. A futures contract is an agreement to buy or sell an asset at a future date at an agreed-upon price. A futures-based ETF tracks cash-settled futures contracts, unlike a spot ETF that tracks the price of the asset itself.
At least five other futures ETFs are looking to launch in the near future, with two potentially launching shortly.
Will Spot ETFs make it to the stock exchange?
For now, the answer is no based on the reason SEC stated above. However, bitcoin spot ETFs hope that if the futures succeed, then they can at least be considered.
If you’ve always wanted to invest in crypto but were wary of the volatility surrounding it, as well as the fact that it is largely unregulated, the Bitcoin Futures ETF may be a safer, less-risky option to consider.
Source: Business Insider