Enter Your Information Below To Receive Free Trading Ideas, Latest News And Articles.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!
The launch of a Bitcoin futures ETF could potentially pave the way for the introduction of a spot Bitcoin ETF in the US. With this in mind, we spoke to ProShares, one of the largest ETF issuers in the US, about their view on the potential benefits and risks of a Bitcoin futures ETF for institutional investors.
ProShares believes that the launch of a Bitcoin futures ETF can provide institutional investors with a regulated product to access the digital asset class. Until now, investing in cryptocurrency has only been possible through thinly regulated intermediaries that often carry significant risk profiles. This includes vetting of counterparties, cyber security standards, and compliance structure. In addition, crypto-based investments are very difficult to liquidate in the absence of a functional secondary market.
The introduction of a Bitcoin futures ETF can potentially reduce some of the risks associated with intermediary-mediated investments. This would be beneficial to institutional investors as it would provide a regulated vehicle where they can invest and benefit from price appreciation of the underlying asset.
It is also worth noting that the futures ETF structure is relatively more flexible than a spot-based ETF, as the futures ETF can use derivatives to hedge long and short exposures across different expiries. This could be beneficial to institutional investors in volatile markets.
However, there are some risks associated with a Bitcoin futures ETF, including potential illiquidity in the underlying futures contracts and price manipulation. The ETF issuer would have to address these risks in order to ensure that the fund operates in a safe and liquid manner.
In any case, the approval of a spot Bitcoin ETF in the US would likely dampen the demand for a Bitcoin futures ETF, as institutional investors will prefer to invest in the spot market, where the exchanges are highly regulated.