The Security and Exchanges Commission (SEC) has approved the first Bitcoin exchange-traded fund (ETF) in the US. The ETF from Proshares begins trading Tuesday October 19th under the ticker BITO on the New York Stock Exchange (NYSE).
In a statement made on Monday, ProShares CEO Michael L. Sapir stated that BITO will allow those who “have a brokerage account and are comfortable buying stocks and ETFs” exposure to the lucrative crypto market. It gives traditional traders exposure without going through the “hassle and learning curve of establishing another account with a cryptocurrency provider”.
After initially delaying the decision on BTC ETFs, rumours of the approved ETF last Friday lead to a strong bullish movement of Bitcoin with the Bitcoin price rising over 10% last Friday to break past the $60,000 dollar mark. The confirmation announcement on Monday further pushed the price past $62,000.
What is the Proshares ETF BITO?
The Proshares ETF (BITO) is a Bitcoin Futures ETF, meaning it does not give exposure directly to Bitcoin, but allows investors to gain exposure to the Bitcoin Futures market. Unlike buying spot Bitcoin on Coinspot or Coinbase, Futures are derivatives and do not hold the underlying asset and instead exchange the value of the contract. The value of the contracts is derived from the underlying value of Bitcoin.
Due to the ETF being based on Bitcoin Futures, some are skeptical. Ben Cruishank, head of Flourish (an investment platform), exclaimed that “derivatives [are] a less efficient form of ownership”. This criticism was echoed by Bitboy Crypto who suggested that spot Bitcoin, which has to be settled in Bitcoin, was “far more bullish than Futures settled on paper”.
Regardless of the criticism, Open Interest (OI) of Bitcoin has soared following the announcement, showing that the market sees this recent development as very bullish for Bitcoin and Bitcoin Futures.
What does this mean for Australians?
For Australian Investors, the Proshares ETF brings multiple benefits. It firstly allows Australian investors who trade on the NYSE to gain regulatory-compliant exposure to the BItcoin Futures market. Secondly, it creates precedent for Australian Bitcoin ETFs and further validates Bitcoin as a legitimate asset in the international community.
With the Australia Stock Exchange (ASX) also recently listing their first cryptocurrency ETF, Betashares Crypto Innovators ETF (ASX: CRYP), the US’s Proshares ETF announcement further displays the growing acceptance of Bitcoin from the wider investing community.
Jonathan Miller, Managing Director for Kraken Australia, reiterated this sentiment expressing that the Proshares BTC Futures ETF can be seen as a part of the mainstream adoption Bitcoin has been experiencing. However, he expressed concerns of the derivatives-based ETF stating that “while this is a really positive thing for the maturation of the industry, it isn’t necessarily the watershed moment for accessibility”. He goes on to posit that the further we move from the underlying asset, the higher the risk and cost will be.
Miller, like many, is interested to see how Australian regulators will react to the Proshares ETF news. With the Betashares crypto ETF already trading on the ASX, Australian investors are hoping the SEC approved ETF will further spur the development and approval of other crypto ETFs on the ASX.
Investors are expecting the SEC to announce its decision on the 3 more Bitcoin ETF applications by the end of the month.
