This week, the crypto market completed a milestone-the first Bitcoin ETF in the United States will begin trading on Tuesday. This news once again spurred the rise of Bitcoin, whose price exceeded $60,000 for the first time since May. The official name of the ETF is ProShares Bitcoin Strategy ETF (the ProShares Bitcoin Strategy ETF), which is a futures ETF, which is very different from ordinary ETFs. The transaction code is BITO, which provides a new way to buy Bitcoin in the traditional securities market.
What exactly is the ProShares Bitcoin ETF?
ETFs are "Exchange Traded Funds". ETFs buy and package one or more assets-a basket of investment products from gold to stocks of different companies (for example, cannabis ETFs), and finally sell them in the form of a stock, which can be traded on the open market by anyone. The ETF makes its price track the price of the underlying asset.
However, the new Bitcoin ETF is somewhat different from the "pure" Bitcoin ETF. ProShares is not buying and packaging Bitcoin, but a futures contract linked to the future price of Bitcoin. As the company stated clearly in its announcement on Monday morning. "BITO, the ProShares Bitcoin Strategy ETF, will mainly invest in Bitcoin futures contracts and will not directly invest in Bitcoin."
This sounds complicated, isn't it?
Unless you are an experienced trader, it is definitely more complicated than the company's common stock. Unlike ordinary ETFs, futures ETFs can be traded at different values. This is partly because professional traders use futures ETFs to arbitrage price changes, and also because the fund must pay to roll over monthly contracts. The result of these operations is that the price of ProShares ETF will track the value of Bitcoin within a certain range, but will not achieve the accuracy of traditional ETFs.
How do I buy a new Bitcoin ETF?
ETFs are traded on the stock market, so if you have an account with a brokerage company, such as Fidelity or Robinhood, just look up the stock symbol and buy it like Microsoft, Tesla or Square stocks.
When can I buy it?
ProShares officially announced on Monday that BITO will start trading on Tuesday.
How much does the ETF charge?
According to MarketWatch, the annual fee of the ProShares ETF is 0.95%. Therefore, if you buy $1,000 in stocks, there will be a cost of $9.5 per year. This is higher than the fees charged by most ordinary ETFs. This is mainly because this is a futures ETF.
Yes, it is expected that as many as three or four other funds will be approved by the US Securities and Exchange Commission and begin trading this week. But they will also be futures ETFs, similar in price and structure to ProShares products.
U.S. regulatory approval of traditional Bitcoin ETFs may be at least a few months away. It is unclear whether the SEC allows futures ETFs to indicate that it will also allow spot Bitcoin ETFs.
Is this a good way to buy Bitcoin?
If you want to gain exposure to Bitcoin through a brokerage account, this ETF provides a new way to do this. Please note that you can also do this by buying shares of Grayscale Bitcoin Trust (stock code: GBTC), and this option has been around for a long time, but there is a 2% annual fee, and the prices of GBTC and Bitcoin are not the same. Not an exact match. Another roundabout way is to buy shares of companies that hold Bitcoin, such as MicroStrategy, Square, and Tesla; earlier this month, the US Securities and Exchange Commission approved a "Bitcoin" company that holds Bitcoin or is developing a Bitcoin product. "Coin Revolution Company" ETF.
But most long-term cryptocurrency promoters will tell you that the best way to buy bitcoin is to simply buy bitcoin. You can buy directly from brokerage companies such as Coinbase, Binance, Kraken, Gemini, Robinhood, Square or PayPal. The advantage of this is that the cost is lower and it ensures that the price you pay is almost entirely the current market price. But buying cryptocurrency directly does require some technical steps. Many people think these steps are daunting or hesitant. This is why so many market experts believe that Bitcoin ETFs will bring a lot of new investors to Bitcoin.