Bitcoin exchange-traded fund debuts on Wall Street

The first Bitcoin exchange-traded fund on the US market made its debut in New York, marking the first time that cryptocurrency-related products appeared on major Wall Street exchanges.

this ProShares Bitcoin Strategy ETF It will be listed on the New York Stock Exchange after the market opens on Tuesday. Although similar ETFs have been traded in other jurisdictions, listing on the world’s largest stock market in the United States is to test whether mainstream investors are willing to put cryptocurrencies together with stocks, bonds, and other traditional assets in their portfolios. A key test.

“This is an important milestone for ETFs. Together with the first stock ETF [in the US] In 1993, the first fixed-income ETF in 2002 and the first gold ETF in 2004,” said Michael Sapir, CEO of ProShares, which manages a $65 billion ETF and is headquartered in Bethesda, Maryland.

Bitcoin has risen to near the all-time high set earlier this year, partly due to the expectation that Bitcoin ETFs will bring new funds to the digital asset market. The most actively traded cryptocurrency rose above $62,000 on Tuesday, more than doubling from the low during the summer sell-off.

For eight years, ETF providers have been lobbying the US Securities and Exchange Commission to allow these types of instruments to be traded on the national stock exchange. However, due to violent fluctuations in asset classes and widespread concerns about the industry, the top securities regulator in the United States is reluctant to give the green light. It did not respond to a request for comment on the matter.

ProShares Bitcoin ETF holds futures contracts that track the price of Bitcoin, rather than directly buying digital coins. SEC Chairman Gary Gensler has said that because futures are traded in a regulated market, the committee is more willing to accept this structure. Spot trading of cryptocurrencies is conducted on various exchanges that are largely unregulated.

Although U.S. investors can already buy Bitcoin through private trusts (such as the $39 billion Grayscale Bitcoin Trust) or directly through crypto exchanges, Sapir said that ETFs will open the market to a wider range of investors, including the use of 401( k) Investors of pension funds, individual retirement accounts and brokerage accounts.

Ben Johnson, Head of Global ETF Research at Morningstar, said that the arrival of Bitcoin ETFs “opened up investment opportunities for a larger asset pool than ever before, including the nest eggs of many investors.”

However, “given the puzzling historical volatility of this asset, investors should be cautious, if any,” he added.

ProShares’ competitor Invesco said late Monday that it will not seek futures Bitcoin ETFs in the “near term.” The group collaborated with Mike Novogratz’s Galaxy Digital to launch a set of encryption products, but will still promote an ETF program that holds digital tokens instead of tracking their futures.

Grayscale also stated on Tuesday that it has submitted an application to the US Securities and Exchange Commission to convert its flagship Bitcoin trust into an ETF.

Although futures-backed ETFs are associated with more mature products, when fund managers switch to new contracts when the previous contract expires, investors may face losses-called “rollover costs.”

ProShares data shows that by the end of September this year, the $1,000 investment in bitcoin futures at the beginning of 2019 will become $10,879, while similar investments in spot bitcoin will be $11,784.

Todd Rosenbluth, Director of ETF and Mutual Fund Research at CFRA Research, said that in addition to rollover costs, “the futures market is rarely exactly the same as the underlying securities, and sometimes it may be significantly different. This is why More people in gold ETFs and futures choose physical products.”

However, he added that there are still “some investors who are very satisfied with ETFs, and they may be interested in these products from the beginning”.

Additional reporting by Michael Mackenzie

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