ProShares Bitcoin Strategy ETF (BITO), the first-ever futures ETF to launch, back in October 2021 just experienced a surge of investments following June’s crypto ETF wave. BITO gathered investments of over $65 million in the past week, setting a new record for 2023.
In April, investors poured $40 million into BITO, but the remainder of the year showed no significant upticks. BITO is among the three only futures ETFs to be approved by the SEC, next to Valkyrie and VanEck. Although the past week saw an overwhelming amount of spot ETF applications, including Blackrock’s. The SEC is yet to approve any spot ETF application to this day.
$BITO , the Bitcoin Futures ETF, just had its best 2023 week yet as investments have been pouring in, while its assets topped $1 billion in value. Friday also marked the day when the futures ETF traded over half a billion in shares.
A few factors can be attributed to the uptick in BITO’s investment numbers, among which is Blackrock’s spot ETF application which many investors see as a sign of a thriving market. The fact that Bitcoin now trades at around $31,000, after a significant uptick from $26,000 last week. And to top it off, a new exchange named EDX Markets just launched, backed by Fidelity, Charles Schwab, and Citadel Securities.
First of all, let’s define what an exchange-traded fund (ETF) is. ETFs are a way for investors to put their money into digital assets without having to sign up for exchanges or set up their own wallets. For example, if an investor aims to put money into Bitcoin, they can invest in an ETF’s shares which directly reflect actual Bitcoin values. Oftentimes, ETFs will charge investors fewer fees compared to exchanges, effectively giving them control over digital assets without giving them actual ownership of them.
A futures ETF is basically a way for investors to bet on the future of a digital asset. In the case of Bitcoin, investors would determine a date in the future when they expect a specific value for their Bitcoin investment. Basically, investors would be investing their money into the Bitcoin market often optimistically predicting the future of Bitcoin. However, futures contracts do not give ownership of Bitcoin to investors, only potential financial gains from their investments.
On the other hand, spot ETFs reflect the exact value of a digital asset. For example, if investors want to put their money into a Bitcoin spot ETF, they’d pay prices that directly reflect the value of Bitcoin at the time. Many prefer investing in spot ETFs. However, there’s yet to be any Bitcoin spot ETF to be approved by the US Securities and Exchange Commission.
Back in 2016, Grayscale, a digital asset management company, attempted to convert its publicly-traded Grayscale® Bitcoin Trust (GBTC) to a Bitcoin spot ETF but was denied by the SEC. Grayscale spent the majority of 2017 attempting the conversion until the company finally gave up and withdrew its application.
In 2021, Grayscale filed another application for a spot ETF but was formally denied by the SEC. The SEC cited that the “listing exchange fails to establish that other
means to prevent fraudulent and manipulative acts and practices will be sufficient, the listing exchange must enter into a surveillance-sharing agreement with a regulated market of significant size because such agreements detect and deter fraudulent and manipulative activity.”
Grayscale then proceeded to file a lawsuit against the SEC for weaponizing its authority to prevent a legitimate spot ETF from being approved. A court hearing was set for March 7th, 2023. However, there have been no updates on the case since.
Now that Blackrock has officially submitted its request for approval on a Bitcoin spot ETF, many are anticipating the emergence of the market’s first spot ETF as Blackrock has had 575 ETF applications approved out of 576 applications submitted in the past.