A lot of excitement erupted in New York this week with the launch of the first Bitcoin Trading Fund (ETF) approved by the US Securities and Exchange Commission. The ProShares Bitcoin Strategy ETF (BITO) made a startling debut on the New York Stock Exchange as the second most traded discovery fund of all time, and some call it “a watershed moment in the cryptocurrency industry.”
But others, like Arca boss Rein Steinberg, have “mixed feelings” about the events. While he was pleased that the long-awaited crypto investment tool finally received regulatory approval, ending eight years of nonsense on the part of American issuers, he had some skepticism that the product would finally get approval from the Securities and Exchange Commission, or rather, , which also . It is based on futures contracts and does not directly track the price of Bitcoin (BTC).
“We don’t think a futures ETF is a good way to get Bitcoin,” he said on his blog, adding that research is the most in demand. “Investors are ready to take part in bitcoins.
Markus Hammer, a lawyer and director of consulting firm Hammer Execution, agreed with others that the event was a major milestone, but warned, “This is just a milestone on a long journey,” as he told Cointelegraph, “As an investor, if you buy cryptocurrencies, and many of them prefer a fund that tracks ‘physical’ bitcoins over their derivatives. ”
ProShares ETF is a bet on the future price movement of BTC. This means that “the product ultimately differs from the price of bitcoin itself, along with the fact that the issuer of ProShares is just another intermediary and thus represents a counterparty risk for the investor.”
Futures ETFs vs. Real ETFs – What Does It Matter?
Campbell Harvey, professor of international business at Duke University, told Cointelegraph that many institutional investors are likely to wait for a physical bitcoin ETF pegged to the spot market rather than a derivatives market that tracks the actual price of a cryptocurrency. He explained that the BTC futures market is relatively small, “buying pressure on futures contracts will result in negative“ rolling yields, ”which means:
“You pay a premium to buy futures every time you ‘move’ to the next contract. It is much better to buy physically, but the SEC has not given any indication that they are willing to allow this. ”
In an interview with CNBC shortly after its October 19 launch, SEC chief Gary Gensler suggested why the agency only allowed this indirect path into the crypto space: “What you have is a product that has been followed by the US for four years. a federal regulator, the CFTC, which has been enclosed in something within our jurisdiction [such as the SEC] under the Investment Companies Act 1940, so we have some opportunity to use that to protect investors. ”
In other words, the new product will have two layers of regulatory protections – CFTC and SEC – against would-be hackers, manipulators, and fraudsters.
Regardless of its origin, the ProShares fund clearly resonated with investors – by the end of the second trading day, its total assets reached $ 1 billion, which is the closest fund to this brand.
“This is the first US ETF designed to track bitcoin and it definitely means something,” Jeff Dorman, Chief Investment Officer of Arca told Cointelegraph, “but it’s definitely not the product the market wants and it’s not financial. “It is convenient for consultants to sell, so this is definitely not the product that the market wants, and it is not a product that financial consultants can safely sell. This is likely to result in less use of funded ETFs. ”
Some, including Harvey, were so important that Invesco, the leading ETF provider, announced on Monday that it is abandoning attempts to issue a BTC futures ETF – at least temporarily – and is focusing instead on “finding support.” … “ETFs of physical, digital assets,” an Invesco spokesman told Bloomberg.
Will pension funds pay off?
When asked about pension funds, a cautious but huge subset of the institutional investor community, Dorman told Cointelegraph, “Pension funds have done due diligence for years” with cryptocurrencies, but Bitcoin futures ETFs are unlikely to get the job done. “He’s moving the needle a lot with this class of investors.” “But if ETFs increase market value and liquidity, massive market growth will make it easier to comfortably invest in pensions.”
“ProShares Bitcoin Futures ETF is guaranteed to lift Bitcoin’s position in the institutional investment environment,” Ben Kaslin, head of research and strategy at AAX cryptocurrency exchange, told Cointelegraph.