Shares of the first U.S. bitcoin-linked exchange-traded fund rose slightly when they debuted on Tuesday.
The ProShares Bitcoin Strategy ETF, ticker ‘BITO’, jumped around 3% at the start of trading and last traded 0.6% to $ 40.26. The fund tracks CME bitcoin futures, or contracts speculating on the future price of bitcoin, rather than the crypto itself.
This means that ETF investors should expect the price and performance of stocks to differ somewhat from the price of bitcoin itself. This is not ideal for existing investors; many of them took a long-term view of cryptocurrencies and were hoping for an ETF that would track physical bitcoin that investors could buy and hold.
The price of bitcoin briefly climbed Tuesday morning after trading began, jumping 3% to $ 63,035.04, according to Coin Metrics, and approaching its all-time high from April 14 of $ 64,899 before falling. . Bitcoin futures also gained around 2%.
“The fund seeks to provide capital appreciation primarily through managed exposure to bitcoin futures contracts. The fund does not invest directly in bitcoin,” the fund’s ProShares website states. The fund has an expense ratio of 0.95%.
ProShares is the eighth largest ETF provider in terms of assets, according to ETDB.com. The company is known for its funds which use leverage to track the movements of certain indices multiplied by a certain amount. Executives at ProShares have rang the opening bell on the New York Stock Exchange, where the ETF will be traded.
The crypto industry has longed for a bitcoin linked ETF for many years. Around 2017, asset managers began pushing for the launch of Bitcoin spot ETFs, but their proposals were rejected by the Securities and Exchange Commission, which maintained that none were able to prove the resilience of the market to manipulation. The rush for forward ETF applications came this year shortly after President Gary Gensler took over as head of the agency.
“What you have here is a product that has been overseen for four years by the US federal regulator CFTC, and that’s wrapped up in something that comes under our jurisdiction called the Investment Company Act of 1940, so we have some ability to integrate it with investor protection, ”Gensler told CNBC’s“ Squawk on the Street ”Tuesday. “It is still a highly speculative asset class and auditors should understand that underneath there is still the same aspect of volatility and speculation.”
Some argue that the impact of an ETF, especially related to futures, is mitigated by the adoption of crypto by businesses and fintechs. There are many ways for investors to gain indirect exposure to bitcoin without actually owning it, through institutional-grade funds, financial apps like PayPal and Square’s CashApp, or crypto-related stocks like Coinbase and mining stocks.