ProShares has thrown its hat into the ring to become the first exchange-traded fund (ETF) provider to receive approval from the U.S. Securities and Exchange Commission (SEC) to launch a Bitcoin ETF.
As revealed in a filing registered with the SEC on September 27, ProShares is applying to list two Bitcoin ETFs on the NYSE Arca trading platform. Neither fund will hold bitcoin directly but will rather trade in bitcoin futures contracts.
ProShares Bitcoin ETF aims to track the performance of the lead month bitcoin futures contract, which serves as the fund’s benchmark. Since the fund deals in futures contracts rather than bitcoin itself, its performance may diverge substantially from that of the bitcoin price itself. From the filing:
“A change in the price of bitcoin today will not necessarily result in a corresponding movement in the price of the Bitcoin Futures Contracts since the price of the Bitcoin Futures Contracts is based on expectations of the price of bitcoin at a future point in time. As a result, each Fund should be expected to perform very differently from the performance of bitcoin (or the inverse of such performance) over all periods of time.”
The company has also applied to list ProShares Short Bitcoin ETF, an inverse fund that seeks to track, for a single day, the inverse (-1x) of the fund’s benchmark. Because the value of this fund increases as the price of futures contracts decline, it will enable investors to hedge against a drop in the price of futures contracts.
It is unclear whether ProShares will be able to overcome the regulatory hurdles that have prevented other firms–such as Winklevoss Capital and SolidX–from listing their funds on the NYSE. Although funds tracking the price of bitcoin futures are available in Europe, the SEC has yet to approve a crypto ETF for U.S. investors.
Nevertheless, recognizing that there is a market for these investment vehicles, fund providers continue to submit applications in a bid to be the first company to list a cryptocurrency-tracking fund. Many analysts, including ETF researcher Dave Nadig, predict that the SEC will approve a Bitcoin ETF–most likely one that deals in futures rather than cryptocurrency itself–within the near future, and perhaps before the end of the year.
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Last modified: March 4, 2021 5:00 PM