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The first Bitcoin ETF trading in the United States begins on the New York Stock Exchange (NYSE) to track Bitcoin price through future-based contracts
The first Bitcoin ETF in the United States will begin trading on the New York Stock Exchange (NYSE) 8 years after the Winklevoss brothers submitted their first application for a Bitcoin Exchange-Trading Fund (ETF). ProShares, a provider of specialty exchange-traded products based in Bethesda, Maryland, submitted an application on Friday, October 19, 2021, to begin trading in the Bitcoin Strategy Fund. The fund, which will be traded under the ticker BITO, will track the price of Bitcoin (BTCUSD). through futures contracts traded on the Chicago Mercantile Exchange (CME).
Michael Sapir, CEO of ProShares, emphasized that the launch of the ETF is a milestone. “1993 is remembered for the first equity ETF, 2002 for the first bond ETF, and 2004 for the first gold ETF. 2021 will be remembered for the first cryptocurrency ETF,” he said.
The CEO of ProShares, Michael Sapir, said that funds will provide exposure in cryptocurrency to investors who have brokerage accounts “but don’t want to deal with the hassle and learning curve of setting up another account with a cryptocurrency provider….suppliers may be unregulated and subject to security risks.”
A Bitcoin ETF is considered the Holy Grail by some because it could open the floodgates to the injection of massive investment in the asset class by institutional investors
More progress needed for cryptocurrency investment products – Douglas Yones, Head of Exchange-Traded Products at NYSE
Douglas Yones, head of exchange-traded products at NYSE, told The New York Times more progress remains to be made on cryptocurrency investment products even despite the exciting steps and significant occasions of the ETF listing.
Listing of more futures-based Bitcoin ETFs in public markets expected
Other Bitcoin ETF applications that the SEC will comment on this month include those from investment firms Invesco Ltd., Valkyrie Investments, and VanEck Associates Corp. According to reports, the agency is expected to follow a similar course of action for its application. a way to get more future-based bitcoin ETFs listed on the public market.
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Warnings of Investing in Futures-Based Bitcoin ETFs
Securities and Exchange Commission (SEC) has played spoilsport to this dream by rejecting numerous applications for funds that track the spot prices of Bitcoin.
SEC is concerned with the volatility of cryptocurrency prices and the potential for price manipulation in Bitcoin’s largely unregulated ecosystem since major cryptocurrency exchanges, which are used to set spot prices for Bitcoin exchange-traded products, are not registered with the SEC, making it difficult for the agency to verify their trade flow.
Moreso, futures prices are based on bets made by trading the future price of an asset. They do not involve actual bitcoin holdings or trading at spot prices. Instead, CME calculates an hourly Bitcoin Reference Rate (BRR) based on trading flows from major spot exchanges.
The agency while demanding to be in full supervision of cryptocurrency exchanges, outlined its concerns with the Bitcoin ecosystem in a January 2018 letter published after the 2017 run-up in Bitcoin prices
Key Takeaways
- The first strategic Bitcoin ETF in the United States begins on NYSE trading on Oct. 19.
- The ETF tracks bitcoin prices through futures contracts traded at the Chicago Mechantile Exchange (CME).
- Three other Bitcoin ETFs are expected to make their debut in trading markets in the coming months.
- While they offer exposure to a rapidly growing asset class, futures-based Bitcoin ETFs contracts come with several attached warnings and cautions
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