Cryptocurrencies made new headway into mainstream U.S. markets today with the launch of a bitcoin-based ETF on the New York Stock Exchange.
Why it matters: The ProShares Bitcoin Strategy ETF, ticker symbol BITO, is the first-ever ETF that gives investors exposure to bitcoin — without needing those investors to actually hold the digital coin.
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What it is: The ETF can be traded like a stock, is regulated by the SEC, and invests primarily in futures contracts that bet on the price of bitcoin.
What it's not: A fund that holds bitcoin.
How it works: BITO’s price will change based on the price of the futures contracts that it selects.
The price of the futures contracts will change based on their bets on the price of bitcoin.
Backdrop: ETFs are viewed as one way to get more institutional investors on board with crypto more easily.
Yes, but: Some analysts say bitcoin still holds high underlying risk.
What they're saying: “[W]hile we see potential for the technologies underpinning digital assets, we continue to view the coins themselves as speculative,” UBS researchers wrote in a note on Tuesday.
What to watch: About a dozen high-profile applications for bitcoin ETFs are waiting for SEC approval.
SEC chair Gary Gensler has been in favor of futures-linked ETFs but still calls cryptocurrency the “Wild West.”
How BITO performed its first day: Shares jumped higher out of the gate, with $280 million worth of shares traded in the first 20 minutes, according to early reports and more than $850 million by the end of the day when it closed up 5%.
Our thought bubble, via CoinDesk’s Zack Seward: Today was definitely a big moment for the crypto industry, because it's been something that has been sought for a long time. At the same time, it's something that the industry sees as a tempered version of the dream, because it's based on futures prices, not real-time prices.
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