Bitcoin futures ETF demand surges on trading debut

The first bitcoin-linked exchange-traded fund in the US, the ProShares Bitcoin Strategy ETF, saw strong investor demand during its trading debut, marking a watershed moment for the crypto industry.

The fund — trading under the ticker BITO — rose as much as 5.4 per cent to $US42.15 before paring gains and turning negative at one point. Still, more than 20 million shares changed hands by around 2.54pm in New York, according to data compiled by Bloomberg. Because of the way the fund settles trades, net flows into or out of the product probably won’t be known until overnight on Wednesday.

With turnover of around $US850 million an hour before its first trading day closed, BITO stands as the second-most heavily traded ETF for a first day of trading, only surpassed by a BlackRock carbon fund, which ranks higher due to pre-seed investments, according to Athanasios Psarofagis at Bloomberg Intelligence.

Bloomberg also reported that options on BITO will begin trading on the NYSE Arca Options and NYSE American Options exchanges on Wednesday.

Meanwhile, bitcoin made a run at its record high. It gained as much as 3.6 per cent to trade around $US63,600, slightly below its April all-time high of just under $US65,000. BITO was up about 1.6 per cent as of 2.55pm in New York.

“From our conversations with market participants, I think it’s related to the growing belief as the trading day goes on that this is going to be considered a successful launch,” said Stephane Ouellette, chief executive and co-founder of FRNT Financial Inc., a crypto-focused capital-markets platform. “Given the amount of avenues retail investors already have to participate in BTC, clearly the US-based ETFs are nonetheless satisfying some kind of latent, even if niche, demand.”

A bitcoin ETF has been long-awaited by both the crypto community and investors on Wall Street, many of whom have argued for years that approval by regulators would open up digital currencies to more mainstream investors.

The ProShares fund is based on futures contracts and was filed under mutual fund rules that SEC chairman Gary Gensler has said provide “significant investor protections”.

“We are really excited to bring BITO, the first bitcoin-linked ETF, to investors as an important opportunity for them conveniently to invest in bitcoin in their regular brokerage account,” Simeon Hyman, global investment strategist at ProShares, said on Bloomberg TV. “This is going to allow many people who have been waiting for an easy way to do this and a robust way to do this to now be involved and have it in their portfolios.”

Retail investors rushed to buy the ETF on Tuesday. BITO was one of the most-bought assets on Fidelity’s platform with more than 8800 buy orders coming from customers as of 2.55pm New York time.

“It’s an incredibly bullish week — there’s been really positive sentiment around the ETF in particular,” said Sam Bankman-Fried, chief executive officer FTX, one of the largest crypto exchanges.

It’s long been assumed that whoever received approval first could stand to reap the greatest benefits — including industry recognition as well as potentially attracting huge amounts of cash.

Some analysts are already bullish on BITO’s prospects — the futures-based bitcoin ETF could attract more than $US50 billion in inflows in its first year given the hype around it, according to noted bitcoin bull Tom Lee, co-founder of Fundstrat Global Advisors.

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