The first-ever ETF linked to the world’s largest cryptocurrency debuted Tuesday. It became the second-most heavily traded fund on record.
Then Wednesday, Bitcoin hit an all-time high, topping $66,000. Its price shot up so fast that at one point, its value increased more than a thousand dollars in a minute.
After almost a decade of wrangling with regulators, the ETF industry has finally gotten a fund that tracks the price of Bitcoin. But at this point, it may be easier and cheaper for the average investor to just buy Bitcoin.
The ProShares Bitcoin Strategy ETF — ticker BITO — began trading Tuesday in a landmark moment for the $6.8 trillion ETF industry. In the first hour and a half of trading alone, more than $400 million worth of shares changed hands.
Since 2013, when crypto investors Cameron and Tyler Winklevoss first submitted a proposal to create a Bitcoin ETF fund, various issuers have tried to get permission for one. At the time, buying Bitcoin was complicated and somewhat technical, requiring a whole new vocabulary to learn and digital encryption keys to keep track of, and the risk of losing it all by accident.
That ignited a flurry of new applications, including one co-branded with Cathie Wood’s Ark Investment Management. Although ProShares is the first to be approved, many more are coming soon, such as one from Valkyrie Investments Inc. which plans to launch Wednesday under the ticker BTFD.
Meanwhile, the Grayscale Investments LLC is filing to convert its $40 billion Grayscale Bitcoin Trust (ticker GBTC) into an ETF — this one physically holding Bitcoin.
Bitcoin and Bitcoin futures may sound almost identical, but there are key differences. Futures track Bitcoin’s spot price indirectly through the use of contracts overseen by the Chicago Mercantile Exchange. They also require investors to put down cash to trade, as a form of collateral. Traders often use futures to bet on price movements, such as shorting the price of Bitcoin or to hedge other bets.
Still, the prices of Bitcoin and its futures tend to trade in line. As of 10 a.m. Tuesday, Bitcoin traded around $62,550, compared with Bitcoin futures at $63,610.
Whether you’re new to crypto or a tried-and-true investor, it’s hard not to be intrigued by such a buzzy new product. Here’s what to know if you’re considering making a purchase:
What’s the case for buying?