Bitcoin ETF: Demand for ProShares to Attract $50B, Invesco Drops Out of Race, Valkyrie Changes Ticker to BTFD
“1993 is remembered for the first equity ETF, 2002 for the first bond ETF, and 2004 for the first gold ETF. 2021 will be remembered for the first cryptocurrency-linked ETF,” says ProShares Michael Sapir.
ProShares has launched the first bitcoin-linked ETF in the US on NYSE under the ticker BITO. CEO Michael Sapir says this launch marks “a milestone for ETFs.”
BITO offers investors an opportunity to gain exposure to Bitcoin returns, which so far this year has been of more than 111%, through a brokerage account. The ETF can be bought and sold like a stock and doesn't require an investor to have a crypto wallet or an account at an exchange.
“1993 is remembered for the first equity ETF, 2002 for the first bond ETF, and 2004 for the first gold ETF. 2021 will be remembered for the first cryptocurrency-linked ETF.”
ProShares Bitcoin Strategy ETF (BITO) is investing primarily in bitcoin futures contracts and does not invest directly in the leading cryptocurrency, which has a market cap of $1.17 trillion.
By tracking the Bitcoin futures listed on regulated exchange CME, BITO will face the challenge of contango — futures typically trade at a premium to spot and the farther out the expiry, typically the larger the premium — which will also result in tracking error over time.
However, it will “still be good for retail,” said Brett Harrison, President at derivatives platform FTX.US.
“Retail traders already enjoy easy access to spot crypto, and they will benefit from the indirect demand for liquidity in spot caused by increased trading of crypto futures by institutions in connection with BITO.”
Huge Flow Incoming
As of writing, Bitcoin is trading at $62,200 on Coinbase, while on CME, it is at $62,565. On Monday as well, the price of BTC went as high as $63,330, while on the largest spot exchange in the US, it was $62,990.
As this reveals, the spread between the spot price of Bitcoin and Bitcoin futures is currently offering the widest annualized return in five months. On Binance, BTC’s annualized daily basis has also climbed to 12.28%, up from -0.96% on Sept. 24 but much lower than 41.4% high in mid-April.
This basis trade where a speculator buys Bitcoin in the spot market and sells long-dated futures to lock in this discrepancy between the two prices is happening amid the price surge bolstered by Bitcoin Futures ETF approval.
— Eric Balchunas (@EricBalchunas) October 19, 2021
According to Bitcoin bull Tom Lee, co-founder of Fundstrat Global Advisors, the ETF would attract more than $50 billion in inflows in its first year.
“We think Bitcoin demand will exceed the inflows for QQQ,” Lee wrote in a note Monday, referring to ETF giant Invesco QQQ Trust Series 1 fund. That two-decade-old fund tracks the benchmark Nasdaq 100 equity index and has over $188 billion in assets to rank as the fifth-largest ETF.
Valkyrie, meanwhile, has changed the ticker for its Bitcoin futures ETF to BTFD, an acronym that stands for “buy the fu*king dip.”
According to Bloomberg ETF analyst James Seyffart, Bloomberg has received a listing action from Valkyrie for their ETF, which might start trading on Wednesday or Thursday. The post-effective prospectus filing with the US SEC, detailing when its Bitcoin futures ETF will begin trading, is still missing, though.
Amidst all the excitement, Invesco has dropped its pursuit of Bitcoin Strategy ETF just a day before the first such product is set to trade.
“We have determined not to pursue the launch of a Bitcoin futures ETF in the immediate near-term,” said an Invesco spokesperson in a statement.
However, they will be pursuing a physically-backed, digital asset ETF and will continue to work with Galaxy Digital towards that, they said.
While Invesco has yet to file a notice with the SEC officially declaring its withdrawal, a filing on Monday announced that it was delaying the effective date of its futures ETF to the end of this month.