The First Bitcoin ETF Begins Trading

  The first bitcoin exchange-traded fund started trading Tuesday, making the most widely traded cryptocurrency available to most investors with a brokerage account.


  •   What is happening?

  The ProShares Bitcoin Strategy ETF began trading at $40 a share under the ticker symbol “BITO” and finished the day up 5%. The ProShares fund is the first of what is expected to be several ETFs that track bitcoin futures to debut on Wall Street.

  VanEck, Invesco, Valkyrie and Galaxy Digital are among several investment firms that have applied with the Securities and Exchange Commission to launch bitcoin ETFs.

  Bitcoin has surged in value this month in anticipation of the fund's debut and thanks to the fact that more big institutional investors are buying it. The cryptocurrency has rallied despite continued criticism from JPMorgan Chase (JPM)CEO Jamie Dimon, who recently dubbed it “worthless.”

  Prices topped $64,000 Tuesday afternoon, up from just below $44,000 at the end of September, a more than 40% surge.

  Bitcoin is now within 1% of its all-time high of a little less than $65,000 earlier this year.

  •   What are bitcoin ETFs?

  An exchange-traded fund is an investment that tracks the price of a basket of underlying assets and is tradable on U.S. stock exchanges. In this case, the funds would track the price of bitcoin futures traded on the Chicago Mercantile Exchange, rather than bitcoin itself.

  •   Why are these ETFs futures-based?

  These funds wont hold actual bitcoins. Instead they will deal in bitcoin futures, which trade separately on regulated U.S. exchanges such as CME.

  Regulators prefer futures-based ETFs because the SEC lacks jurisdiction over crypto trading venues that arent registered as exchanges in the U.S. The SEC says that leaves investors vulnerable to fraud and manipulation because regulators have no insight into where bitcoins are coming from and how prices are being determined.

  The SEC hasn‘t approved exchange-traded funds that hold bitcoin or other cryptocurrencies directly, and the agency has suggested it wouldn’t back such a move at this time.

  •   Is this why bitcoin is going crazy again?

  Yes. Bitcoin has surged in recent days, with fans contending that the launch of a bitcoin ETF would increase the cryptocurrencys legitimacy and make it easier for institutional investors to get exposure.

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