Bitcoin hits new high as launch of new fund opens up market to wider class of investors

Shares of the first U.S. bitcoin-linked exchange-traded fund rose in their trading debut Tuesday.

The ProShares Bitcoin Strategy ETF, ticker “BITO,” jumped 4.8% to close at $41.94. The fund tracks CME bitcoin futures, or contracts speculating on the future price of bitcoin, rather than the crypto itself.

That means investors in the ETF should expect the price and performance of the shares to differ somewhat from the price of bitcoin itself. This isn’t ideal for existing investors; many of them take a long view on cryptocurrencies and had hoped for an ETF that would track physical bitcoin that investors could buy and hold.

uesday was the first day of trading for the ProShares BitCoin Strategy ETF – and saw its shares rise by 2.6% before ascending further on Wednesday.

The ETF does not invest directly in Bitcoin but instead in the futures market linked to the cryptocurrency.

But the development is seen as bringing a new class of investors – with those with a traditional brokerage account able to buy or sell the ETF.

ProShares chief executive Michael Sapir said in a statement earlier this week: “We believe a multitude of investors have been eagerly awaiting the launch of a bitcoin-linked ETF after years of efforts to launch one.”

He said the ETF “will open up exposure to bitcoin to a large segment of investors who have a brokerage account”.

These could be investors who “are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider and creating a bitcoin wallet or are concerned that these providers may be unregulated and subject to security risks”, Mr Sapir said.

Bitcoin has attractions for those who hold a portfolio of investments as it moves independently of other assets such as stocks or bonds.

Its role has sometimes been compared to that of gold, seen as a store of value at times of volatility elsewhere – though the cryptocurrency has a much shorter track record.

Others see digital currencies independent of governments as the future of finance though they are still not widely used as a form of payment.

The energy-intensive “mining” process in which computers generate Bitcoins has drawn sharp criticism because of its environmental impact.

Regulation also poses a threat, with China last month declaring Bitcoin transactions illegal.

In the US, the chair of the Securities and Exchange Commission has said cryptocurrencies do not have enough protections for investors.

James Quinn, managing partner at Hong Kong-based cryptocurrency private wealth manager Q9 Capital, said the
launch of the new ETF was “meaningful” for Bitcoin as it could be “available to a lot of folks”.