BITCOIN ETF |
| Credit: Criptovaluta |
WHAT ARE BITCOIN ETFs?
• The first bitcoin-based exchange-traded fund called the ProShares Bitcoin Strategy ETF recently started trading in the US, marking a milestone for the cryptocurrency market.
• These funds invest in bitcoin futures contracts, or agreements to buy or sell the asset later for an agreed-upon price, rather than bitcoin directly.
• It allows trading through a regular investment account and cuts out the issues and security concerns of cryptocurrency exchanges.
HOW DOES IT WORK?
• An ETF is a regulated investment vehicle that tracks the performance of a particular asset or group of assets and allows investors to diversify their investments without actually owning the assets themselves.
• The cash component to the investment (70%) goes into short-term securities, Treasury bills, etc., while the other (30%) goes into an account with a commodity futures exchange where Bitcoin Future contracts will be traded.
• ETFs, offer investors some safety over buying assets directly because they must be either authorized funds or recognized schemes that are subject to regulatory regulations.
BITCOIN ETFs: STATISTICS
• The ProShares Bitcoin Strategy ETF had one of the most successful opening days in the history of ETFs, bringing in $550 million from crypto enthusiasts.
• It has also become one of the most sought-after funds, as it became the fastest ETF to reach the $1 billion mark in assets under management (AUM).
• The impact on the price of Bitcoin has been extraordinary. It soared past its all-time high of $64,895 to the new record of $66,975.
• The fund has traded over $2 billion in volume since its debut.
BITCOIN ETF: APPROVAL
• The Securities and Exchange Commission, US has been slow to embrace bitcoin, citing concerns about a lack of regulation and the possibility of market manipulation and fraud.
• There was a shift in August when SEC chairman, Gary Gensler signaled the agency may be more open to a futures-backed bitcoin ETF under the Investment Company Act of 1940, which governs mutual funds and may offer "significant investor protection."
• An important distinction to the approval was that BITO does not directly hold Bitcoin, but instead trades on Bitcoin futures.
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