New Kid on the Block: Welcome ProShares’ Bitcoin Strategy ETF (BITO)

ProShares’ Bitcoin Strategy ETF (BITO) became the first U.S. Bitcoin futures exchange-traded fund, launched on the New York Stock Exchange last Tuesday, that managed to attract more than $1.1 billion within just the first two days. The fund tracks CME bitcoin futures, or contracts on the future price of Bitcoin, rather than the spot price of the crypto. That means investors in the ETF should expect the price and performance of the shares to deviate somewhat from the price of Bitcoin itself. This isn't ideal for existing investors; many of them take a long view on cryptocurrencies and had hoped for an ETF that would track physical Bitcoin that investors could buy and hold.

The U.S. crypto industry has been waiting for a Bitcoin-related ETF for many years. In about 2017, asset managers began applying to launch spot Bitcoin ETFs but their proposals were rejected by the Securities and Exchange Commission, which maintained none were able to prove market resistance to manipulation. The rush of applications for futures-based ETFs came this year shortly after Chairman Gary Gensler was appointed to lead the agency. Earlier this year, the Canadian Toronto Stock exchange launched three Bitcoin-linked ETFs having started the unstoppable extravaganza.

U.S. Securities and Exchanges Commission’s (SEC) Gary Gensler commented on CNBC's "Squawk on the Street" last week, that "...you have here is a product that's been overseen for four years by the U.S. federal regulator CFTC, and that's being wrapped inside of something within our jurisdiction called the Investment Company Act of 1940, so we have some ability to bring it inside of investor protection. It's still a highly speculative asset class and listeners should understand that underneath this, it still has that same aspect of volatility and speculation." The warning is heard, so let’s move forward.

The recent ETF attack has put more pressure on Grayscale, the largest Bitcoin fund on the market to date, to become an ETF rather than Trust as it is now, but under current SEC management that seems unlikely to happen. Notwithstanding, the excitement in the crypto space is growing and Bank of America's analytical charts team recently wrote a report pointing at the stocks best positioned to benefit from their asset exposure to Bitcoin.

In terms of the current price trends, after a short downside correction, Bitcoin started a fresh increase above $62,500. Right now it is trading close to $63,160. The next key resistance levels now are near the $63,200 and $63,470 marks. A hike above $63,500 will add momentum and may increase the chances of a move towards the $65,000 level during the next week. So far the timing is almost impeccable for this upward trend to continue.