The first Bitcoin ETF will start trading in the US. What does this mean for the market :: RBC.Crypto

On October 19, Bitcoin Strategy ETF shares from ProShares will become available to investors on the New York Stock Exchange. Why it can be considered a pass to the digital asset market for large institutional players

October 19 on the New York Stock Exchange (NYSE) will start bargaining the first U.S. exchange-traded fund (ETF) based on the bitcoin futures of the Chicago Mercantile Exchange (CME Group). The Bitcoin Strategy ETF from ProShares has received SEC approval and will be traded under the ticker BITO.

Various companies, including ARK Investment, Fidelity Investment, VanEck, One River and others, have been trying to get SEC approval to launch Bitcoin ETFs since 2013. Until now, the regulator has rejected all applications for the launch of exchange-traded funds based on cryptocurrency.

What is ETF

ETF (exchange traded fund) are investment funds that form portfolios of assets and issue their own shares, where each security is tied to a certain part of the fund’s assets. Thus, ETFs allow you to purchase an asset without actually owning it.

In the case of the Bitcoin Strategy ETF from ProShares, the fund will be pegged to Bitcoin futures, which have been traded on the Chicago Mercantile Exchange since 2017. ProShares warns potential investors that the price of bitcoin futures may differ from the price of the first cryptocurrency on the spot markets.

After the start of trading Bitcoin Strategy ETF on the NYSE, institutional and retail investors will be able to access bitcoin directly through a regular brokerage account, explained Gleb Kostarev, director of Binance in Eastern Europe. According to him, investors wishing to purchase the first cryptocurrency will not need to independently use the functionality of crypto exchanges and store digital assets.

Market perspective

The launch of the first Bitcoin ETF in the United States is important primarily because it is another fully regulated instrument that allows you to invest in cryptocurrencies, says Mikhail Karkhalev, financial analyst at Currency.com crypto exchange. In his opinion, against the background of strict bans on cryptocurrencies in China, a more loyal position of the United States allows the industry to develop and grow further, despite the fact that, as in the country, there is still no legislation regulating the crypto market.

Tough measures against cryptocurrencies began to be introduced in China at the end of May this year after the call by Vice Premier of the State Council of the People’s Republic of China Liu He to tighten regulation of digital assets. Local provincial authorities began to ban the mining of cryptocurrency, and crypto business began to leave the country. In September, the PRC authorities completely banned cryptocurrency transactions, equating them with illegal financial activities.

The launch of the Bitcoin ETF is one of the most important milestones in 2021, Kostarev is sure. He believes that there will be a large influx of institutional investors into the cryptocurrency market in the near future. Many investors, who are often very far from digital assets, have shown an active interest in bitcoin and the cryptocurrency market in general over the past year, explained the director of Binance in Eastern Europe. According to him, many such investors from investing in cryptocurrency were stopped by insufficient regulation of the industry, a low level of trust in it, as well as low awareness of digital assets.

“The barrier that exists between potential investors and cryptocurrencies will be overcome thanks to the bitcoin ETF,” Kostarev said.

The start of Bitcoin ETF trading in the United States actually means the adoption of cryptocurrency by the regulator and permission for large institutional investors to enter the crypto market, said Yuri Mazur, head of data analysis at CEX.IO Broker. He recalled that Tesla was one of the first public companies to invest in bitcoin directly, but this strategy is not suitable for all organizations.

How Investors Use Bitcoin ETFs

The Bitcoin ETF will be of interest not only to institutional investors, but also to retail investors, says Mazur. He explained that a cryptocurrency-based exchange-traded fund will be available on regular stock exchanges, which will greatly simplify the process of investing in bitcoin. Another advantage of the bitcoin ETF, Mazur called a lower entry threshold, since the value of one share of the fund will be significantly lower than the price of bitcoin. By data ProShares, the Bitcoin Strategy ETF will start trading at a set price of $ 40.

Investors will be able to use Bitcoin ETFs to diversify their portfolios, as the instrument will be less risky and volatile, Karkhalev explained. According to him, thanks to the bitcoin ETF, investors will have less chance of running into fraudulent projects when trying to make money on cryptocurrency.

“Perhaps the profitability will not be as high as if you were investing in HYIP in Shiba Inu, but the risks of losing all capital are significantly less,” added Karkhalev.

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