Bitcoin ETF took up 95.5% of the market

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ProShares, which launched the first Bitcoin ETF (BITO), bought 4,840 CME-traded contracts. That’s equivalent to 95.5% of total AUM among the three SEC-approved exchange-traded funds, according to Arcane Research analysts’ calculations.

Competitors BTF by Valkyrie Investments and XBTF by VanEck account for 3.9% and 0.6% of total AUM, respectively. Trading of the first instrument started on October 22 and the second on October 25. Retail investors gained access to BITO on October 19.

Since the debut of the exchange-traded fund from ProShares its AUM increased by 147%, the indicator BTF from the first day of trading increased by 50%, XBTF – decreased by 5%.

At the moment ProShares is reorienting the exchange-traded fund to December contracts from November contracts, which will soon expire. Analysts saw this as a move to save money on rollovers. According to their estimates, the size of BITO could have a noticeable impact on the underlying bitcoin futures.

The volume of funds raised in this exchange-traded fund indicates that there is real demand for bitcoin in traditional markets, the experts summed up.

Let’s remind, in October ProShares submitted the application in CME for removal of restrictions on the maximum allowed volume of contracts to purchase.

Earlier Bloomberg analysts doubted the appearance of a spot bitcoin-ETF before the futures Ethereum-ETF.

Bitcoin ETF launch

Bitcoin-ETF has long been the “Holy Grail” for many in the cryptocurrency community. Not only industry experts, but also analysts from traditional financial institutions have claimed that such a product could become a real game-changer. 

In October, the market got the desired instrument, albeit with an underlying asset in the form of a derivative for digital gold. 

What is an ETF?

An Exchange Traded Fund (ETF) is an index fund whose shares are traded on a stock exchange. Actually, ETF is a type of security, acting as a certificate for a portfolio of stocks, bonds, commodities or cryptocurrencies.

The price of this security follows an index based on certain underlying assets.

In the US, in order to register an ETF fund, an ETF provider submits an application to the Securities and Exchange Commission (SEC). The SEC classifies the shares of such funds as securities.

How is an Bitcoin ETF different from an investment fund?

Unlike an investment fund (e.g. a mutual fund), with an ETF one can carry out the same operations as with stocks in stock trading. Thus, transactions in ETF shares can be carried out throughout the trading day and their price can vary depending on the supply and demand ratio and the activity of market participants.

ETF shares are usually more liquid than investment fund units. The latter are usually traded in the country of fund’s establishment. However, exchange-traded investment funds may be traded on foreign exchanges. ETFs may also be traded on margin.

Since an ETF is traded like a stock, it does not calculate the daily net asset value, as is the case with an investment fund. Also note that the market value of such assets may be higher or lower than the net asset value.

Net Asset Value (NAV) is the price per share of an investment fund or ETF. The per share value of a fund is calculated by dividing the total value of all securities in its portfolio (less all liabilities) by the number of such assets outstanding.

Why are crypto-enthusiasts paying attention to Bitcoin ETFs?

ETFs are a more or less familiar instrument to members of the world of traditional finance. The popularity of such products grows from year to year.

To invest in bitcoin ETFs, market participants don’t need to have a wallet, register on a digital asset exchange, worry about safe custody of funds, etc. Also, investors are not exposed to the risks of hacking trading platforms, fraud by dishonest exchange owners, and phishing attacks. Consequently, these instruments may be of interest to traditional investors who do not want to delve into technical aspects.

There is an opinion that bitcoin-ETFs will certainly attract large investments to the cryptocurrency market, and this will contribute to the growth of its capitalization, as well as the massive adoption of new assets.

For example, Ari Paul, co-founder of cryptocurrency hedge fund BlockTower, is convinced that the influx of institutional investors will be the main driver of the next mid-term bitcoin price rally. According to Paul, the main barrier preventing big investors from entering the industry is the lack of reliable storage solutions for digital assets aimed at market whales.

IronWood CEO Michael Stratton is confident that if the SEC approves a cryptocurrency-based ETF, large investment firms and funds, including Fidelity and Ameriprise Financial, will certainly enter this market.

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