The first Bitcoin Futures ETF to be approved by the U.S. Securities and Exchange Commission began trading on Tuesday. It has become the fastest fund ever to reach $1 billion in assets under management (AUM). The previous record-holder was a gold-based ETF with the ticker GLD, which took 3 days to hit $1 billion in 2004. This clearly shows the demand from institutions for a regulated way to gain exposure to Bitcoin.
The ProShares Bitcoin Strategy ETF (BITO) tracks CME bitcoin futures contracts rather than the underlying asset itself. This is an important point to note as the fund will not be required to purchase Bitcoin on the spot market. However, it is a step towards a fully-linked Bitcoin ETF in the future. The CME futures have been overseen by the Commodities Futures Trading Commission (CFTC), the SEC’s sister agency, for the past four years so the SEC view it as a safe place to start offering Bitcoin-related funds.
What are ETFs
An ETF is a publicly-traded investment vehicle that tracks the value of an underlying asset or group of assets; in this case the asset is Bitcoin. This might have you questioning why you wouldn’t just purchase Bitcoin from a cryptocurrency exchange. A Bitcoin ETF allows investors to gain exposure to the asset without having to worry about the complexities of cryptocurrency exchanges, wallets and transactions. Moreover, ETFs are much better understood across the investment world than cryptocurrencies are currently. An investor can therefore trade an investment vehicle that they are familiar with instead of having to learn everything involved with trading Bitcoin.
Impact on Bitcoin spot price
The announcement of an approved Bitcoin futures ETF began circulating on Friday 15th October when the spot price was $56,750. Almost a week later and Bitcoin is trading at $64,500 which is up around 14%. A price correction in the short term looks likely with the RSI indicating it is overbought.
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