In only four hours, the ProShares Bitcoin Strategy Fund trading under the ticker BITO hit the $1B trading volume milestone.
Bitcoin Futures ETF breaking records
Bitcoin proponents have long argued that Bitcoin’s narrative of being “digital gold” is not only a narrative but that the cryptocurrency is, in fact, superior to gold in every aspect. Whether that’s true is debatable, but Bitcoin easily surpassed the record set by gold for hitting $1 billion in trading volume after the launch of its ETF. The ProShares Bitcoin ETF called BITO did so in only four hours while SPDR Gold Shares GLD exchange-traded fund needed three days after its launch in 2004. Nate Geraci, president of the ETF store said: “The ProShares Bitcoin Strategy ETF is now one of the most successful launches in ETF history. The initial demand for this ETF is off the charts and has exceeded even the most optimistic expectations. It’s clear investors and advisors were craving bitcoin price exposure in their traditional brokerage accounts and IRAs.”
As a result of that launch, Bitcoin put in a new all-time high of more than $66,000, and many expect it to trade even higher in 2021. However, investors should not forget that the futures on which the ETF is based started trading in 2017, and Bitcoin skyrocketed upon their launch, topping at around $19,000 four years ago. Although the price has trebled since 2017, it took the cryptocurrency three years to hit that level again.
Why Bitcoin ETFs are driving the price up
Although several altcoins rallied upon news of the Bitcoin ETF as well, the OG cryptocurrency saw the biggest price move. Bitcoin ETFs had previously been approved in Canada and in Europe, but listing on a U.S. exchange gave Bitcoin not only a boost in legitimacy but also exposed it to the world’s deepest and most sophisticated financial markets. However, could this mean the start of a new end-of-year rally for Bitcoin?
Traders and analysts tend to agree with that notion, as several other funds have applied for Bitcoin ETFs, signaling a continuous influx of institutional money in the bitcoin market. Moreover, other ETFs that provided exposure to companies with bitcoin on their balance sheets were also approved. Lastly, SEC Chairman Gary Gensler is amenable to an ETF that buys crypto futures rather than actual bitcoin since futures have been regulated by the Commodity Futures Trading Commission since late 2017. It means funds do not have to hold bitcoins for trading, although cynics argue that Gensler would obviously approve of this since it would make price manipulation easier. Either way, futures ETFs are an easy way for big investors to get involved, which would mean more demand still to come in the last two months of the year.
Yet, that is not guaranteed, as previous watershed events have shown. Bitcoin futures trading started right at the top of the 2017 bull market, and a brutal bear market ensued. The Coinbase IPO preceded the spring 2021 correction that saw BTC fall more than 50% in value from its high. Bitcoin bulls should not let their guard down because the markets might punish any sign of weakness.
