Stake Academy - The $BITO ETF
After years of speculation, a Bitcoin ETF is here. ProShares Bitcoin ETF (BITO) is now live and trading on Stake. Investors can now access the largest cryptocurrency on the market through their equities portfolio. With that, let’s take a closer look at how issuers like ProShares will structure such an offering.
Into the future
A typical equity ETF will hold stocks on their balance sheet. For instance, Cathie Wood’s ARK Innovation ETF will hold Tesla shares on their books and adjust their position as more funds flow in and out of the ETF. Every $1 you invest in the ETF will correspond to real shares in different companies.
A Bitcoin ETF will not buy Bitcoin, rather it buys and sells Bitcoin futures. The main reason is that the SEC regulates the futures exchanges. Without a crypto exchange having sufficient regulatory oversight, such a structure protects investors from potential manipulation and risks associated with unregulated crypto exchanges. This is a huge development for many funds and investors who are mandated to invest in certain markets and exchanges.
Moreover, derivatives like options markets will be created with $BITO as the underlying asset, providing more options and sophistication for professional investors
A futures based ETF will track Bitcoin’s price closely but not necessarily exactly. One reason for this is the fact $BITO does not trade around the clock like Bitcoin does. There will be moves up and down at open to match the true price of Bitcoin. The general efficiency of the market will ensure the prices do correlate.
On its first day of trading, $BITO saw over US$1b of total volume. It instantly became the second most traded ETF to debut in market history. With US$1b in inflows, $BITO became the quickest ETF to reach that market.