The first bitcoin-linked exchange-traded fund in the United States today debuted on the New York Stock Exchange, presenting new investment opportunities for holders of brokerage accounts.
Though the offering, called the ProShares Bitcoin Strategy ETF (trading as BITO), falls short of what the cryptocurrency industry has long advocated for—funds that invest directly in bitcoin—its launch marks another watershed moment for the nascent market.
The anticipation propelled the world’s largest cryptocurrency to break above $62,000 for the first time since April on Friday, just below its all-time high of $64,957, set in the spring. At press time, it is trading at $62,903.
“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,” says ProShares CEO Michael L. Sapir. He adds that the vehicle will help those who are hesitant about “creating a bitcoin wallet or are concerned that these providers may be unregulated and subject to security risks.”
Bethesda, Md. firm, an ETF provider with more than $64 billion in assets, filed an updated prospectus with the offering with the Securities and Exchange Commission late Friday after Thursday reports signaled that the SEC wasn’t likely to block a bitcoin futures exchange-traded fund.
ProShares will not invest directly in or hold the cryptocurrency but instead will be purchasing cash-settled, front-month CME bitcoin futures—monthly contracts with the nearest expiration date that trade on the Chicago-based CME exchange—and will charge a management fee of 0.95%, to be paid each year as a percentage of investment’s value, ProShares’ global investment strategist Simeon Hyman confirmed to Forbes. ProShares estimates annual expenses for those investing in the fund at $97 per $10,000 invested—less than half of the 2% world’s biggest bitcoin fund, Grayscale Bitcoin Trust, charges.
Many hope that the futures-based ETF will pave the way to ultimately launching a full-fledged bitcoin ETF. Industry participants have sought to launch one since 2013, when Tyler and Cameron Winklevoss, billionaire founders of cryptocurrency exchange Gemini, filed the first bitcoin ETF application. The SEC has rejected every previous filing to date.
Forbes’ director of data and analytics, Javier Paz, thinks this “SEC experiment” will help “absorb much of the popular demand for bitcoin without causing the cryptocurrency to skyrocket overnight.” Nearly 40 bitcoin ETF applications, including those from Cathie Wood’s ARK Investment Management, Galaxy Digital, VanEck, and Valkyrie, are pending the Commission’s review.
ProShares, which had previously filed with the Commission for two bitcoin ETFs in 2017, keeps its finger on the pulse. “As other ways to access bitcoin mature, we’ll keep an eye on it,” said Hyman. “We’re always ready to consider additional solutions for investment.”
I report on cryptocurrencies and other applications of blockchain. A Russia native, I am a graduate of NYU Abu Dhabi and Columbia University’s Graduate School of Journalism
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