Bitcoin trading fund to debut

Prices soar beyond $60,000 ahead of today’s launch in N.Y.

Bitcoin logo appears on the display screen of a cryptocurrency ATM in Salem, N.H. ProShares said Monday it plans to launch the country?s first exchange-traded fund linked to Bitcoin today. 
(AP/Charles Krupa)
Bitcoin logo appears on the display screen of a cryptocurrency ATM in Salem, N.H. ProShares said Monday it plans to launch the country?s first exchange-traded fund linked to Bitcoin today. (AP/Charles Krupa)

Bitcoin has been on a tear in recent weeks, approaching a record prices above $60,000, as cryptocurrency enthusiasts anticipate a big moment for the cryptocurrency.

ProShares will start an exchange-traded fund today on the New York Stock Exchange linked to Bitcoin futures, the firm and the exchange told the DealBook newsletter. The fund will give investors exposure to Bitcoin without having to hold the cryptocurrency directly, via any ordinary brokerage account.

"2021 will be remembered for this milestone," said Michael Sapir, chief executive officer of ProShares. Investors who are curious about cryptocurrency but hesitant to engage with unregulated cryptocurrency exchanges want "convenient access to Bitcoin in a wrapper that has market integrity," he said. For nearly a decade, cryptocurrency entrepreneurs and traditional finance firms have sought permission to offer a Bitcoin exchange-traded fund in the United States, but their applications have been delayed or denied by the Securities and Exchange Commission. Many remain pending.

A Bitcoin futures fund falls short of what some purists want: a fund that holds cryptocurrency directly. Gary Gensler, the SEC chairman, recently suggested that the agency might allow cryptocurrency funds based on futures -- bets on Bitcoin's price fluctuations rather than the underlying cryptocurrency itself -- that trade on a highly regulated exchange.

Approval for the ProShares fund, which is based on Bitcoin futures that trade on the Chicago Mercantile Exchange, won't be announced by the SEC, but the firm's final prospectus met with no opposition ahead of its effective deadline, and the New York Stock Exchange is readying for its introduction today.

Bitcoin's true price isn't easy to quote, Sapir said. There's no single, reliable market reference, and prices vary up to 5% from one cryptocurrency exchange to another. Many analysts believe futures prices on the Chicago exchange are the most accurate reflection of Bitcoin market sentiment. From Sapir's perspective, the futures-linked fund is effectively a Bitcoin exchange-traded fund, even if it's not tied to spot markets. (It also avoids issues like custody of cryptocurrencies.)

"This is an exciting step but not the last," Douglas Yones, the New York exchange's head of exchange-traded products, told DealBook. He foresees a range of cryptocurrency-linked funds getting approval, eventually. The ProShares fund is another sign of cryptocurrency's move toward mainstream legitimacy in a year of milestones for the industry, including cryptocurrency exchange Coinbase going public. Critics remain wary of cryptocurrencies, as do regulators, but the digital-asset craze of 2021 shows few signs of abating.

U.S. market for exchange-traded funds has grown to more than $5.4 trillion and they're owned by roughly 9% of all the nation's households, according to the Investment Company Institute.

An exchange-traded fund allows investors to easily buy a whole basket of investments. Some of the most popular funds track things like the S&P 500 index of big U.S. stocks, the price of gold or high-yield bond indexes.

Unlike with a traditional mutual fund, which prices just once a day, investors can buy or sell an exchange-traded fund throughout the trading day. That's particularly important for cryptocurrencies, whose prices can swing sharply from minute to minute, let alone day to day.

The Bitcoin futures market is overseen by the Commodity Futures Trading Commission, which may offer investors more protection. But it also doesn't perfectly track the price of Bitcoin.

"This is not a replacement for owning bitcoin directly," said Todd Rosenbluth, head of exchange-traded fund and mutual fund Research at CFRA.

Information for this article was contributed by Ephrat Livni of The New York Times and by Stan Choe of The Associated Press.

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