Everything About The New Bitcoin-based ETF
It is a new beginning in the crypto market as the world’s largest cryptocurrency has made an all-time high. After several attempts by the buyers to breach above its high set in May, the prices went into a downtrend to obtain a better discount. Finally, as the bulls took support at around $30,000 ago, the prices went on to make a new ATH, as we are currently witnessing.
With the sentiment in and around the Bitcoin space getting more optimistic, this trillion-dollar market is achieving stability and better liquidity day after day. Also, with the recent launch of Bitcoin ETF in the US stock exchange, there has been a massive demand and buzz shift towards it.
Bitcoin Futures ETF Goes Live
Bitcoin cryptocurrrency that was known to the mainstream, has now indirectly made its entry into the stock markets. After fighting through the guidelines and approval criteria from the Securities and Commission Exchange (SEC) for many years, the crypto-based Exchange Traded Fund has finally launched in the US stock exchange.
With the hype all around the listing of the Bitcoin futures ETF, the demand grew outrageously. As a result, the listing took a hit from Investors’ expectations. Although there was an initial pump in the prices with the listing, the ETF got devoured later to make a new low. However, it is just the beginning for crypto to enter the stock exchange domain. So, it would take a while for the BTC futures ETF to settle and stabilize.
Understanding Bitcoin Exchange Traded Fund (ETF)
A Bitcoin ETF is a type of exchange-traded fund that tracks the price movement of Bitcoin, usually the standardized price.
In the traditional crypto market, Bitcoin token can be traded in the Spot market or in the Futures market. Similarly, the exchange-traded fund can be a Spot ETF or Futures ETF. The price of BTC on the spot market is tracked by a Bitcoin spot ETF, whilst the price of Bitcoin futures contracts is tracked by a Bitcoin futures ETF.
The price of a BTC spot ETF on cryptocurrency exchanges stays close to the current market price, but Bitcoin futures ETFs may trade at a discount or a premium, based on the supply and demand for the core Bitcoin futures contract/.
From an abstract perspective, both appear to be the same as they are listed on the stock exchange in a similar manner, and both provide exposure to Bitcoin without requiring the investor to own the actual cryptocurrencies. And the one that has been approved by the SEC for listing in the US stock exchange is the Bitcoin Futures ETF.
SEC Skeptical About BTC Spot ETF
Several proposals for a Bitcoin spot ETF have been denied by the SEC for years. However, the firm’s preference for futures-based Bitcoin ETFs was unveiled after Gary Gensler, the chief of SEC, slammed crypto, especially the spot industry.
It is a known fact that the Spot market of Bitcoin is not regulated at the federal level in the US. However, the Commodity Futures Trading Commission (CFTC) monitors BTC and ETH futures trading since they are classified as commodities.
The BTC Futures ETF that is live on the exchange is from ProShares, which submitted its application under the Investor Company Act of 1940, which provides more investment protection.
Furthermore, ProShare’s Bitcoin ETF allows traders to solely take long bets. However, a few other firms are requesting approval to provide inverse products that would enable traders to short sell Bitcoin as well.
Extreme Popularity of Bitcoin ETF a Cause of Concern
After swiftly becoming a touch too famous, the ProShares’ Bitcoin ETF is on course to surpass a restriction on the number of futures contracts it may hold.
Speaking of the October contracts, the ProShares ETF has sold 1,900 contracts within a few days of listing, almost approaching the Chicago Mercantile Exchange’s 2,000 monthly limit.
For the next month, November, over 1,400 have already been sold. However, the maximum limit stays at 5,000 contracts.
As a matter of fact, ProShares ETF went on to become the first-ever fund to reach a billion US dollars in AUM in only a couple of days.
BITO Takes a Swing South
BITO is the ticker for the ProShrares Bitcoin Strategy ETF. As can be ascertained from the charts, the price shot up right after the listing. Starting at $42, the prices spiked and went to make a high up to $44. Although the prices did hold for a bit while the market got sold intro from the same highs and brought it down to as low as $39.
As mentioned earlier, it is too early to predict the upcoming price action of the ETF as the reaction remains unsure with respect to both fundamentals and technicals. It is about time to understand and conclude interpretations on the first-ever successfully Bitcoin ETF launched in the US stock exchange.
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