- ProShares’ Bitcoin Strategy ETF soars with a 5% gain on its first trading day
- A Bitcoin futures ETF sounds fairly simple but has risks investors need to consider
Bitcoin’s First Ever ETF Lands on Wall Street
After years of waiting, the crypto community finally welcomed its first-ever US Bitcoin exchange-traded fund. On Tuesday, Bitcoin Strategy ETF, provided by ProShares, landed for trading at the New York Stock Exchange (NYSE).
Moreover, the milestone was so significant the launch became the second-biggest trading debut for an ETF on Wall Street. Over $980 million of shares changed hands on Tuesday and the price of the Bitcoin-linked exchange-traded fund gained 5% to close at $41.94.
That said, the cryptocurrency market is now available to millions of newcomers. In other words, institutional investors and individual brokerage clients could technically get exposure to bitcoin. But is this as simple as it sounds? Not entirely.
With Focus on Clean Energy and Wide Access
The Bitcoin ETF allowed by the Securities and Exchange Commission is a futures-based product. This means anyone who invests in the ProShares’ ETF ends up with contracts to buy Bitcoin at a future price.
Moreover, the Bitcoin Strategy ETF is packaged like a commodity-based fund backed by futures where investors do not own physical commodities. In that sense, investors and traders in futures need to deal with price action like “contango” and “backwardation”.
The first one, contango, happens when the price of a futures contract is higher than the spot price, or the current market price. In addition, backwardation is the opposite – when the sport price is higher than the price of the futures contract.
Buying Bitcoin Directly
Savvy futures traders may prefer to deal with the hassle of relatively complex financial operations. They would also be covering the cost of “the roll”. In practice, futures contracts held by an ETF expire every month. As a result, the ETF must buy the next month’s contracts.
However, for the retail trader or investor, buying bitcoin directly could be a better choice. First, it means access to the underlying asset, bitcoin, without additional costs for buying or holding. Second, it’s fairly simple and straightforward.
It’s worth noting that in the initial stages of bitcoin’s development, investing in the token was complicated and technical. Now, however, as the crypto industry has progressed significantly, buying bitcoin is just a few clicks away.
In conclusion, if you’re looking to dive into the bitcoin revolution, head over to our How It Works guide. In it, you will see the process has now become remarkably convenient, secure, and quick.