After months of trying by many companies, ProShares was the first to launch the US Bitcoin ETF. It is ProShares Bitcoin Strategy ETF (ticker: BITO).
A fee of 0.95% is charged by the ETF, per year. In simpler terms, for every investment of $10,000 in ProShares Bitcoin Strategy ETF, an investor will be required to pay $95 a year, given that the investment amount remains the same. The fee may seem to be high, but with more ETFs being launched this may reduce.
Technically speaking, ProShares Bitcoin Strategy ETF doesn’t give the investor ownership of the Bitcoin, but the fund holds Bitcoin futures, based on Chicago Mercantile Exchange’s Bitcoin Reference Rate. ProShares Bitcoin Strategy ETF, allows the investors to avoid the risky business of Bitcoin and invest in a more reliable market. However, this doesn’t mean that there are no risks associated with ETF in the futures market, risks such as counterparty risks and potential margin and collateral requirements will be there.
There is another risk that is completely based on how futures are being traded and it is every possibility that the trajectory which future prices follow is not the same as that of Bitcoin. But, since both futures and ETFs are well-established financial instruments, the probability of the overall risk is very low in comparison to that in Bitcoin investment.
Since the prices of spot Bitcoin and future do not match always, there will be times when the spot Bitcoin is performing better than the future and vice versa.
Here it is important to note that, unlike many ETFs, ProShares Bitcoin Strategy ETF is not a diversified strategy. This, in simple language, means that, if a person holds S&P 500 ETF, then if Apple is having a bad time in the market, Amazon will have a good one and as an investor, you will be benefited from the progress of Amazon over time. But in ProShares Bitcoin Strategy ETF, the complete bet is on Bitcoin alone, in this case, if other cryptocurrencies started to outperform Bitcoin, the investor will not be able to make any profit.
ETF by many experts is being regarded as an expensive method to hold Bitcoin, but it, however, is also considered as a simple way to add Bitcoin to your portfolio. It is being hoped that approval of ProShares Bitcoin Strategy ETF, will pave the wave for other innovations in the crypto ecosystem, making these assets more accessible to investors.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
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