The first American Bitcoin ETF is here!
ProShares Bitcoin Strategy ETF (BITO), the first US-listed bitcoin ETF started trading today, making the world’s largest cryptocurrency available in tax-efficient packaging for investors through any account brokerage. “2021 will be remembered for this milestone,” said Michael Sapir, CEO of ProShares.
Another bitcoin ETF from Valkyrie Investments is expected to launch tomorrow. Similar products from other vendors like VanEck and Ark are also expected later this year.
The Winklevoss brothers filed their first bitcoin ETF application in 2013, when the cryptocurrency was trading below $ 100. Since then, regulators have rejected requests filed by many ETF providers. Bitcoin is now trading at almost $ 64,000. It has jumped over 40% this month ahead of ETF approval.
Investors can now easily buy bitcoin on crypto exchanges like Coinbase (COIN) and on platforms like PayPal (PYPL) and Square (SQ). Many would still prefer an ETF, so they don’t have to worry about custody issues. They can hold these ETFs in traditional investment accounts where they hold stocks and bonds.
In the absence of an ETF, the investor used a product like the Grayscale Bitcoin Trust (GBTC) which can trade at a discount or a large premium to its net asset value. Bloomberg announced today that Grayscale Investments has filed an application to convert GBTC to ETF.
Investors should remember that BITO does not directly own the cryptocurrency but invests in futures. Futures based products are not as effective as physically backed products in general, as derivatives add another layer of complexity. Due to rolling costs, these ETFs may not closely track the spot price of the cryptocurrency.
SEC Chairman Gary Gensler has expressed his preference for ETFs that hold bitcoin futures, because unlike cryptocurrencies, futures are traded on regulated exchanges.
Futures are not the perfect products that investors have been looking for. Nonetheless, this is a watershed moment for crypto investors and the ETF industry. And I think investors won’t have to wait too long for an ETF to directly hold real bitcoin.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.