Bitcoin ETFs have long been the apple of the cryptocurrency community’s eye. The fact that such a product can bring a revolutionary approach to e-money transactions has been disputed by industry experts and analysts from traditional financial institutions. Let’s find out if Bitcoin futures ETFs can change the market’s attitude to cryptocurrencies or if it’s just a temporary passion.
The historical launch took place on October 19 when ProShares Bitcoin Strategy ETF (BITO) began trading on the New York Stock Exchange. The launch of the trading shares caused vivid interest among the potential investors. The ETF hit hard with one of the biggest first days on record for ETFs, getting about $550 million from crypto-craving investors. Bitcoin’s exchange rate also demonstrated a 4% growth due to active deals with the new ETF on the stock exchange.
Such rapid growth was expected and couldn’t be called surprising. Together with individual investors, many companies have been waiting for years for the first cryptocurrency ETF to appear on the market. These businesses would like to diversify their assets and touch the world of e-money that was too complicated and cloaked by security issues. Bitcoin ETFs can serve as a means of investment for Bitcoin futures contracts through regular investment accounts. The investment funds can perform the role of agreements when buying or selling the shares for an earlier negotiated price. The individual investors would like to strike the iron while it is hot and exchange their conventional ETFs for something new and “hyped.”
To their mutual rejoice, the Securities and Exchange Commission has slightly changed its opinion about digital transformation and crypto ETFs. It happened in August when SEC chairman Gary Gensler stated that the agency might be more open to a futures-backed Bitcoin ETF. The legal foundation for that is the Investment Company Act of 1940, which governs mutual funds and may offer a higher degree of investor protection. Previously, the Commission directly criticized crypto-based ETFs for their insecure and unregulated nature.
Is the Game Worth Trading?
The reasons why the digital transformation of ETFs has gained such attention are quite understandable. Let’s take gold, for example. In the past, gold investments used to be complicated – it was necessary to purchase real coins or ingots. Although there are no such problems with cryptocurrencies — they are easy to transfer, don’t occupy much space, and are less affected by deflation than fiat money — exchange-traded funds give investors a chance to trade assets the way they have traded stocks for years before.
However, there’s always a fly in the ointment. Among the Bitcoin ETFs’ disadvantages are management fees, its inaccuracy, limits to cryptocurrency trading, and, perhaps the biggest one, the lack of Bitcoin ownership.
Some analytics believe that the emergence of Bitcoin futures ETFs will not significantly impact the market in the short term. These are young products with very limited utility, and fundamental shifts require a great deal of liquidity. However, the long-term impact of this event should not be underestimated. Retail investors can look forward to a gradual decrease in volatility. Still, the most significant value of Bitcoin ETFs is creating a precedent. By approving them, the SEC confirmed the absence of plans to ban cryptocurrencies from the economic environment of the USA.