Bitcoin futures ETF debuts as second-highest traded fund ever

The ProShares Bitcoin Strategy ETF - trading under the ticker BITO - rose about 4.9 per cent to US$41.94.
The ProShares Bitcoin Strategy ETF - trading under the ticker BITO - rose about 4.9 per cent to US$41.94.PHOTO: AFP

NEW YORK (BLOOMBERG) - The first Bitcoin-linked exchange-traded fund (ETF) listed in the United States has debuted as the second-most heavily traded fund on record in a watershed moment for the cryptocurrency industry.

The ProShares Bitcoin Strategy ETF - trading under the ticker BITO - rose about 4.9 per cent to US$41.94. More than 24 million shares changed hands on Tuesday (Oct 19), according to data compiled by Bloomberg. Due to the way the fund settles trades, net flows into or out of the product will probably not be known until overnight on Wednesday.

With a turnover of almost US$1 billion (S$1.35 billion), BITO's debut ranked only behind a BlackRock carbon fund for a first day of trading, the latter of which ranks higher due to pre-seed investments, according to analyst Athanasios Psarofagis at Bloomberg Intelligence.

Bloomberg also reported that options on BITO will begin trading on the New York Stock Exchange (NYSE) Arca Options and NYSE American Options markets on Wednesday.

Meanwhile, Bitcoin made a run at its record high of just under US$65,000.

"From our conversations with market participants, I think it's related to the growing belief, as the trading day goes on, that this is going to be considered a successful launch," said Mr Stephane Ouellette, chief executive and co-founder of FRNT Financial, a crypto-focused capital markets platform.

Given the amount of avenues retail investors already have to participate in Bitcoin), the US-based ETFs are clearly "satisfying some kind of latent, even if niche, demand", he said

A Bitcoin ETF has been long-awaited by both the crypto community and investors on Wall Street, many of whom have argued for years that approval by regulators would open up digital currencies to more mainstream investors. The ProShares fund is based on futures contracts and was filed under mutual fund rules that United States Securities and Exchange Commission chairman Gary Gensler has said provide "significant investor protections".

"We are really excited to bring BITO, the first Bitcoin-linked ETF, to investors as an important opportunity for them conveniently to invest in Bitcoin in their regular brokerage account," Mr Simeon Hyman, global investment strategist at ProShares, said on Bloomberg TV.

"This is going to allow many people who have been waiting for an easy way to do this, and a robust way to do this, to now be involved and have it in their portfolios."

Retail investors rushed to buy the ETF on Tuesday. BITO was one of the most-bought assets on Fidelity's platform, with more than 8,800 buy orders coming from customers as at 2.55pm New York time (2.55am on Wednesday, Singapore time).

It has long been assumed that whoever received approval first could stand to reap the greatest benefits - including industry recognition as well as potentially attracting huge amounts of cash.

Some analysts are already bullish on BITO's prospects - the futures-based Bitcoin ETF could attract more than US$50 billion in inflows in its first year given the hype around it, according to Fundstrat Global Advisors co-founder Tom Lee.

There are other applications for futures-based Bitcoin ETFs in the queue. Analysts are anticipating launches from issuers such as Valkyrie, whose Bitcoin Strategy ETF could trade under the ticker BTFD.

Meanwhile, Grayscale Investments and the NYSE have filed to convert the world's biggest Bitcoin fund, ticker GBTC, into an ETF, appealing to regulators for approval just as its wildly popular vehicle is beset with competition.