After eight years of punted deadlines, the first Bitcoin ETF began trading on the New York Stock Exchange today. It was one of the most anticipated events of the year, with longtime enthusiasts pre-christening the approval date “Diaper Monday” — the start of a bull run so intense you’ll soil your pants.
The ProShares Bitcoin ETF (BITO) is backed by CME Group’s Bitcoin futures, as opposed to directly holding bitcoin. While there are extra costs associated with holding futures versus the underlying asset, the futures ETF has regulatory appeal in the U.S. because futures trade on commodity exchanges overseen by the Commodity Futures Trading Commission. On the other hand, the digital currency itself trades anywhere and everywhere, often outside of regulatory oversight. Recently-launched Bitcoin ETFs in Canada and Europe are indeed backed by underlying bitcoin, but the Securities and Exchange Commission in the U.S. has thus far been unwilling to approve a spot Bitcoin ETF.
The day’s trading activity certainly indicates investor interest. With nearly one billion in trading volume on the first day, the ProShares Bitcoin ETF was the second biggest ETF launch of all time (and the biggest launch of the year). Bitcoin itself ended the trading day above $64,000, just shy of the all-time high.
The Bitcoin ETF’s immediate impact on price action may have been overestimated. U.S. brokerages like Robinhood and Interactive Brokers already allow customers to purchase bitcoin from their brokerage accounts. The main benefit of a Bitcoin ETF is that more retail brokers are likely to offer a product that doesn’t come with questions about regulation or custody.
Another side effect of the Bitcoin ETF launch is that investments adjacent to Bitcoin will lose their premium. For many years, Grayscale’s Bitcoin Trust (GBTC) was one of the few ways for retail investors to gain exposure to Bitcoin in a traditional brokerage account. Despite being a closed-end fund with a 2% annual management fee, GBTC has historically traded at a higher price than the value of the underlying bitcoin. Today, GBTC is trading at a 20% discount to its net asset value.
Microstrategy, with its leveraged bitcoin holdings, has also been treated as a proxy for exposure to Bitcoin. Today, the stock closed down 1.58%.