ProShares Bitcoin Futures ETF Trades Tuesday: What You Need to Know

ProShares Bitcoin Futures ETF Trades Tuesday: What You Need to Know

Bitcoin News
October 18, 2021 by J.D. Smith
60
In brief The new Bitcoin ETF will start trading on Tuesday under ticker symbol BITO. It is a futures ETF, which is very different from an ordinary ETF. This week marks a major milestone in the crypto world as the first U.S. Bitcoin ETF begins trading on Tuesday. The news fueled a rally last week,
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In brief

  • The new Bitcoin ETF will start trading on Tuesday under ticker symbol BITO.
  • It is a futures ETF, which is very different from an ordinary ETF.

This week marks a major milestone in the crypto world as the first U.S. Bitcoin ETF begins trading on Tuesday. The news fueled a rally last week, driving the price of Bitcoin above $60,000 for the first time since May.

The ETF, officially known as the ProShares Bitcoin Strategy ETF and set to trade under the ticker BITO, offers a new way to buy Bitcoin on the stock market.

To answer all your potential questions, including how to buy it, Decrypt has prepared this plain English Q&A. This is not investment advice.

What exactly is the ProShares Bitcoin ETF?

ETF stands for “exchange-traded fund.” ETFs buy and package an asset or multiple assets—anything from gold to a themed basked of different corporate shares (for example, a cannabis ETF)—and then sells it in the form of one stock that anyone can trade on the public markets. ETFs are designed so that their price tracks the price of the underlying asset.

The new Bitcoin ETF, however, is a little different from a “pure” Bitcoin ETF. What ProShares is buying and packaging is not Bitcoin, but rather a bundle of contracts tied to the future price of Bitcoin. As the company makes very clear in its announcement on Monday morning: “BITO, or ProShares Bitcoin Strategy ETF, will invest primarily in Bitcoin futures contracts and does not directly invest in Bitcoin.”

That sounds complicated. Is it?

Unless you are an experienced trader, it is certainly more complicated than a regular share of a company’s stock. Unlike a regular ETF, whose price will closely track the underlying asset it holds, futures ETFs can trade at different values. This is partly because pro traders are using futures ETFs to arbitrage price movements and because the fund must pay to roll over monthly contracts.

The takeaway is that the price of the ProShares ETF will approximately track the value of Bitcoin, but not to the degree that a traditional ETF would.

How do I buy the new Bitcoin ETF?

ETFs trade on the stock market so, if you have an account with a brokerage such as Fidelity or Robinhood, just look up the ticker symbol and buy it like you would shares of Microsoft or Tesla or Square.

When will I able to buy it?

ProShares officially announced on Monday that BITO will begin trading on Tuesday.

How much does the ETF charge in fees?

The annual fee of the ProShares ETF is 0.95%, according to Morningstar. So if you buy $1,000 in shares, about $10 a year will go to fees. That’s higher than what most regular ETFs charge. This is largely due to the fact that this is a futures ETF, as described above.

Are other Bitcoin ETFs coming?

Yes, as many as three or four other funds are expected to receive SEC approval and begin trading as soon as this week. But they will be also futures ETFs resembling the ProShares offering in price and structure.

A traditional ETF that holds Bitcoin—which are available in other countries—is still at least months away from regulatory approval in the U.S., and it’s unclear whether the SEC allowing a futures ETF is any indication that it will also allow a “pure” Bitcoin ETF.

Is this a good way to buy Bitcoin?

That depends on you.

If you want to gain exposure to Bitcoin through a brokerage account, this offers a new way to do that. Note that you could also do this by buying shares of the Grayscale Bitcoin Trust (ticker: GBTC)—an option that’s been around for a while, but charges a 2% annual fee and doesn’t exactly match the price of Bitcoin. Another roundabout way to gain exposure to Bitcoin would be to buy shares in companies that hold Bitcoin, like MicroStrategy, Square, and Tesla; earlier this month the SEC approved an ETF of “Bitcoin Revolution companies” that hold Bitcoin or are working on Bitcoin products.

But most longtime cryptocurrency boosters will tell you that the best way to buy Bitcoin is to simply buy Bitcoin. You can do that directly from brokerages like Coinbase, Binance, Kraken, Gemini, Robinhood, Square, or PayPal. Doing it this way results in lower fees and ensures the price you pay is almost exactly the current market price. But buying crypto directly does require some tech steps that many people see as intimidating or off-putting, and that’s why so many market experts think a Bitcoin ETF will bring a flood of new entrants into Bitcoin.