Bitcoin Exchange Traded Fund debuts on Wall Street

The first Bitcoin fund on the US market was debuted in New York and is the first time that a cryptocurrency-bound product appears on a large Wall Street exchange.

The ProShares Bitcoin Strategy ETF started on Tuesday after the opening bell on the New York Stock Exchange. While similar ETFs are already traded in other jurisdictions, the listing in the USA-the world's largest stock market-is an important test of whether mainstream investors are willing to place cryptocurrencies alongside stocks, bonds and other traditional assets in their portfolios.

"In addition to the first stock ETF, this is an important milestone for ETFs [in the US] 1993, the first pension ETF 2002 and the first Gold-ETF 2004," said Michael Sapir, CEO of ProShares, who manages ETFs worth $ 65 billion and has its seat in Bethesda, Maryland.

Bitcoin recovered near the record high that it had achieved at the beginning of this year, partially driven by expectations that Bitcoin ETFs will bring new money into the market for digital assets. The most active cryptocurrency rose to over $ 62,000 on Tuesday after it had more than doubled from a low point during a sale in summer.

ETF providers have been committed to the Securities and Exchange Commission for eight years to ensure that this type of vehicles can be traded on national stock exchanges. However, the top US value paper inspectorate hesitated to give the green light, since the asset class fluctuated heavily and there were general concerns about the industry. She did not react to a request for comment on this matter.

The ProShares Bitcoin ETF holds futures contracts that follow Bitcoin's price instead of buying the digital coins directly. Gary Gensler, Chairman of the SEC, said the Commission would feel more comfortable with this type of structure because futures are traded in a regulated market. The spot trade with cryptocurrencies takes place on a variety of largely unregulated stock exchanges.

Although US investors Bitcoin already via private trusts such as the 39 billion, individual pension accounts and broker accounts.

Ben Johnson, Director of Global Etf Research at Morningstar, said the introduction of Bitcoin ETFs "Open the investment option for a larger wealth pool than ever, including the emergency eggs of many investors".

"In view of the overwhelming historical volatility of the financial value, investors should, if at all, be careful," he added.

The Proshares competitor Insco said late Monday that he would not follow a futures bitcoin ETF "immediately at short notice". The group, which has teamed up with Mike Novogratz ’Galaxy Digital to bring a number of crypto products onto the market, will continue to drive plans for an ETF that holds digital tokens instead of futures that follow them.

Grayscale also said on Tuesday that the SEC applied to convert its flagship bitcoin trust into an ETF.

While futures-based ETFs are linked to an established more established product, investors can calculate with losses-the so-called "roller costs"-if the fund manager changes to a new contract after the previous one.

The data from Proshares indicate that an investment of $ 1,000 in Bitcoin futures would have turned $ 10,879 in early 2019 to the end of September this year, compared to $ 11,784 for a similar investment in spot bitcoin.

Todd Rosenbluth, Head of Etf and Investment Fund Research at CFRA Research, said in addition to the roller costs: "The futures market very rarely matches the underlying security and can sometimes be noticeably different, which is why more people have decided on the physical one when choosing between physical gold dies and futures.

Nevertheless, there is "a subgroup of investors who feel very comfortable with ETFs and who are probably interested in these products from the start," he added.

Additional reporting by Michael Mackenzie