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Image source @Visual China It entered the top 15 in history as soon as it went online, and its first-day trading volume set the second highest record in history. After a long wait of 8 years, the first BTC ETF in the United States was finally launched.
At 9:30 a.m. Eastern Time on October 19, the ProShares Bitcoin Futures ETF was officially listed on the NYSE Arca Market (NYSE Arca), with the code BITO. The opening price on the first day was $40.89, and the trading volume in the first 20 minutes of the opening was as high as $280 million, making it one of the top 15 first-day issuances in history. The final closing price on the first day was $41.94, up 4.9% from the opening net asset value. According to Bloomberg data, the ETF turnover exceeded 24 million units, and the total trading volume on the first day was close to $1 billion. This scale is second only to BlackRock's carbon neutral ETF, becoming the second highest first-day trading volume in history.
Affected by market sentiment, the price of Bitcoin is approaching its record high. As of press time, Bitcoin was priced at US$63,869.5.
ProShares BTC Futures ETF is a Bitcoin futures contract registered with the U.S. Commodity Futures Trading Commission (CFTC) and traded through the Chicago Mercantile Exchange (CME), charging an annual management fee of 0.95% of the investment value.
This BTC futures ETF does not directly invest in Bitcoin spot. The index it tracks is anchored to CME's near-month Bitcoin futures. Ordinary investors only need to buy and sell stocks with legal currency in the securities market. ProShares will sell near-term contracts and purchase forward contracts through swap contracts, track Bitcoin futures contract prices and indices, and obtain stable capital appreciation through refined management of contract exposure.
In the traditional financial trading market in the United States, ETF is one of the most important forms of trading. When a commodity appears in the form of ETF, it means that its compliance and maturity have been highly recognized by the market. ETF securitizes assets through physical collateral, and investors indirectly hold exposure to the underlying by holding fund shares. The trading volume of ETF can account for more than 30% of the total trading volume of the entire US exchange.
The launch of BTC ETF means that the closed door to cryptocurrencies is slowly opening. Investors can indirectly hold exposure to the underlying assets by purchasing fund shares, eliminating the complicated transaction process of purchasing Crypto assets, lowering the threshold for investing in crypto assets, and providing investors with safer trading methods and deposit and withdrawal channels.
Although the stimulating effect of futures ETFs is far from comparable to that of spot ETFs, this moment is of historic significance both for the crypto world and the traditional financial world in the United States.
Why did you choose the ProShares Bitcoin Futures ETF to create history?
As the world's financial center, the United States has always had strict regulatory policies on Bitcoin. After 8 years of long-term efforts, one BTC ETF application after another was rejected. Why did the ProShares Bitcoin Futures ETF become the first approved futures ETF?
First of all, whether from the perspective of compliance or ease of supervision, the first BTC ETF to be approved will definitely be a futures ETF.
Previously, in August of this year, Gary Gensler publicly expressed his support for and preference for a Bitcoin futures ETF based on CME trading. Such a conversation with obvious preference triggered a wave of applications for Bitcoin futures ETFs.
On the day when the ProShares futures ETF was listed, SEC Chairman Gary Gensler said in an interview with CNBC: Bitcoin futures have been regulated by the U.S. Commodity Trading Commission for four years and are listed on CME, so we have the ability to bring it under the scope of investor protection, and Bitcoin is still a highly speculative asset.
ProShares' Bitcoin futures ETF is traded in the previous month on CME. Its policy follows the Investment Company Act of 1940 to provide investor protection measures. The trading venue CME is the world's largest derivatives exchange, which is consistent with the SEC's claim of "being able to provide important investor protection" and avoids the SEC's concerns about the risk of market manipulation in the crypto market.
From the issuer's background, ProShares belongs to ProFunds Group, a professional exchange-traded product provider and one of the largest ETF issuers in the U.S. ProShares has always been at the forefront of the innovative ETF market and is experienced in risk management and investment strategies. It is an old and stable fund company.
Due to the compliance of its products and its strong qualifications, ProShares naturally became the most suitable candidate for the first ETF.
What is the difference between ProShares and past futures ETFs and spot ETFs?
So, what is the difference between ProShares' ETF and the ETFs applied for in the past?
1. Security: In the eyes of the SEC, the security of regulated BTC futures ETFs is significantly higher than that of BTC spot ETFs. BTC futures ETFs do not need to invest directly in the Bitcoin market. The SEC is worried that the current crypto market cannot meet the liquidity needs of the fund well, and in terms of asset custody, there is no secondary platform like Nasdaq with complete pre-market and post-market, market maker seats and clearing systems.
So at this level, the security and compliance of ProShares' CME-based ETF are more in line with the SEC's requirements for investment security.
2. Trading method and underlying reference, futures ETFs will continuously track the underlying price to deliver near-month Bitcoin futures contracts and roll over positions. As prices fluctuate, premiums and discounts continue to rise and arbitrage from them. ProShares' strategic ETF value targets refer to the CME Bitcoin reference rate. BTC futures ETFs may have price anchoring deviation problems, and the premiums and discounts of financial products are not completely related to spot prices.
The BTC spot ETF uses real money to purchase Bitcoin and creates corresponding stocks for trading. The value of the product relies on the investment target and can track the fluctuations in Bitcoin prices.
It should also be noted that since futures ETFs require frequent buying and selling transactions and position adjustments, high turnover rates are not suitable for long-term holding.
8 years of running, the tortuous application road of BTC ETF For the crypto world, the application road of BTC ETF is long and tortuous. In the past 8 years, fund companies that are keen on crypto assets have been committed to the smooth passage of BTC ETF. Since the Winklevoss brothers first submitted the BTC ETF application to the SEC in 2013, the SEC has rejected more than a dozen fund companies' BTC ETF applications, including well-known companies such as Grayscale, ProShares, and Bitwise.
In July 2013, the Winklevoss brothers submitted the first Bitcoin ETF application in the United States: the Winklevoss Bitcoin Trust. In the following four years, they promoted the BTC ETF through various efforts such as changing trading venues and trading rules, but were ultimately rejected by the SEC due to concerns about fraud and market manipulation of Bitcoin.
Former SEC Chairman Jay Clayton has also publicly accused digital currency trading platforms of not having rules and regulatory measures to prevent market manipulation.
On July 12, 2016, blockchain technology company SolodX submitted a BTC ETF application, which was ultimately rejected by the SEC.
On January 20, 2017, Grayscale submitted the Bitcoin Investment Trust and requested to be listed on the New York Stock Exchange. On July 11, 2017, Grayscale finally withdrew its application.
On September 27, 2017, after the SEC rejected Winklevoss’ application, ProShares, which was approved this time, submitted an application for a Bitcoin futures ETF, which was ultimately rejected on August 22, 2018.
Whether it was Gemini’s spot market-based ETF proposal, the derivatives market ETF proposals submitted by Direxion, GraniteShares and Proshares, or the Bitcoin Investment Trust submitted by Grayscale, none of them were able to knock on the door of the SEC.
Fund companies began to find other ways. Some fund companies began to submit ETF baskets containing only a portion (for example, 25% of BTC assets), and combination ETFs containing Bitcoin and US Treasury bonds, but they all ultimately fell into oblivion.
It was not until Gary Gensler, the new SEC chairman who was more friendly to the crypto market, came to power that BTC ETF gradually saw the light of day.
In 2018, at the 2018 ChainDD CHAINSIGHTS Global Summit held by ChainDD in New York, USA, Gary Gensler accepted an exclusive interview with ChainDD. He told ChainDD at the time: The importance of regulatory policies to the development of blockchain. Before blockchain and digital currency are included in the regulatory policy system, the true value of blockchain technology cannot be reflected. Regarding the development of digital currency, Gary Gensler repeatedly mentioned the importance of regulation. He believed that policy regulation of blockchain should belong to the field of public policy regulation. He believed that the true value of blockchain technology could not be reflected until blockchain and digital currency were included in the regulatory policy system.
Talking about the repeatedly postponed Bitcoin ETF, Gary Gensler believes that in order to promote the Bitcoin ETF, the first thing to do is to bring digital currency exchanges into the regulatory system. Only when investors' rights are reasonably protected can the Bitcoin ETF be successfully implemented.
Gary Gensler is a rational reformer. He believes that regulation and innovation have always been complementary. He hopes to find a balance between economic development and regulatory policies, and to protect traders and investors through standardized industry supervision while allowing technological innovation to join the financial highway.
Similarly, Gary Gensler also stated that he does not fully trust the crypto market until crypto digital exchanges are fully regulated by policies.
From the exclusive interview with ChainDD and the voice that Gary Gensler has conveyed to the outside world since taking office, we can see that he hopes to find a balance between technological innovation and regulation, and BTC futures ETF has become the best entry point at the moment.
ETFs on the way to issuance
In addition to spot and futures ETFs, technology-related enterprise ETFs that are more popular with regulators are actually Bitcoin-related ETFs. In early October, the SEC also specifically approved the "Volt Crypto Industry Revolution and Technology ETF", code BTCR. The Volt Fund combines shares of more than 30 companies involved in blockchain technology, including Tesla, Square, Coinbase, PayPal and other technology companies.
Grayscale Trust is a good example of a different approach. After the previous ETF application was frustrated, Grayscale turned to Bitcoin Trust - GBTC, building a bridge between traditional finance and the crypto world, and the stock price is close to Bitcoin. Of course, the long-term lock-up, non-redemption and high premium of Grayscale Bitcoin Trust still make it unable to match and replace the role of ETF.
With the launch of BTC futures ETF, Grayscale also quickly followed up and responded. It has submitted a 19b-4 document to the SEC through the New York Stock Exchange Arca, applying to convert Grayscale Bitcoin Trust (GBTC) into a Bitcoin spot ETF. It hopes to impact the first BTC spot ETF. If the proposal is eventually passed, the positions of GBTC share holders will be automatically converted into an equivalent spot ETF.
Grayscale, which has always been interested in crypto asset ETFs, also plans to convert its other 14 crypto investment products into ETFs.
Inspired by the launch of BTC ETF, Mike Novogratz's Galaxy Digital and Cathie Wood's ARK Invest also plan to apply to launch ETFs similar to ProShares in the coming weeks.
Institutions such as Valkyrie, VanEck, Invesco and BlockFi, which previously competed with ProShares for the first BTC ETF seat, are also eager to try.
Previously, the SEC announced that it would extend the application ruling time for four BTC ETFs by 45 days. The approval dates of these four ETFs: Global X Bitcoin Trust, Valkyrie XBTO Bitcoin Futures Fund, WisdomTree Bitcoin Trust and Kryptoin Bitcoin ETF were rescheduled to the end of November and December. Considering the postponement of the ruling rather than the rejection, their approval rate will also be very high.
On the SEC’s office desk, there is a list of nearly 40 Bitcoin ETF applications lying there quietly, waiting for the SEC’s review.
Some market experts believe that, at present, the success rate of Bitcoin futures ETF applications will be very high. However, the success of futures ETFs does not necessarily mean that spot ETFs can also pass the SEC's review. Spot ETFs may still face a long-term struggle with the SEC, and even another long-distance journey.
In any case, the first stage victory of the Long March has arrived. This is a new era for the crypto world. The funds from the traditional financial world introduced through ETFs in the future will help the crypto world reach a new height. (ChainDD) |
