Bitcoin ETF: Supervisory Arbitrage-From US supervisory authorities

After years of delays and setbacks, a Bitcoin fund, who is trading in the stock market, finally celebrated his debut in the United States. Somehow.

The ProShares Bitcoin Strategy ETF (Bito) started trading on the New York Stock Exchange on Tuesday. Some experts welcomed it as a turning point that would take the digital currency a further step closer to the mainstream. But it could be a bigger step for the nervous supervisory authorities who have approved it than the investors who buy it.

First of all, the ETF is not covered directly by bitcoins. Instead, it holds futures contracts that pursue the cryptocurrency. Potential investors who hope for the speculative volatility of real are disappointed. According to the prospectus, only 25 percent of the fund are invested in Bitcoin futures. The remaining 75 percent flow into staunch money market instruments such as treasure change.

Then costs are incurred. Funds that invest in futures must continue to roll contracts on contracts to maintain their commitment. You pay a fee every time you do this. This can cause special costs if futures with a longer term costs more than futures with a shorter term, says the fund.

All of this is added to an administrative fee of 0.95 percent. A futures ETF offers investors a modest indirect engagement in Bitcoin via a normal broker account. However, the returns are reduced by relatively high costs compared to the direct possession of Bitcoin.

The ProShares ETF presents a number of futures ETFs with Bitcoin taste. However, these will make little waves in crypto investors: they will continue to buy their volatile, carbon-intensive tokens via coinbase or other crypto exchanges.

The actual goal of the ETF is financial advisors who have so far not been able to recommend unregulated bitcoins to their customers. The supervisory authorities see futures, which are severely steamed by money market instruments, as safer. The new funds enable the supervisory authorities to say that they give private investors access to a popular asset and at the same time protect them from their worse excesses. It is more of the regulatory authorities than crypto-new investors who eat their cakes and eat them.

This is the third in a series of articles about digital assets that Lex publishes this week. We have also examined Bitcoin correlations and Investment analysis sister.