Banking

Bitcoin Stocks Pop Ahead Of Bitcoin Futures ETF Launch

ProShares plans to launch the first Bitcoin-linked ETF in the U.S. Tuesday. Bitcoin and Bitcoin stocks rose, including Marathon Digital Holdings (MARA) and Coinbase (COIN).




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ProShares Bitcoin Strategy ETF (BITO) will invest primarily in Bitcoin futures contracts and does not directly invest in Bitcoin.

The price of Bitcoin rose 2.9% on Monday afternoon vs. 24 hours earlier to $61,413, after spiking 13% last week. Bitcoin topped $62,800 on Friday, a six-month high.

BITO will offer investors an opportunity to gain exposure to Bitcoin returns through a brokerage account. BITO can be bought and sold like a stock, and eliminates the need for an account at a cryptocurrency exchange and for a crypto wallet, the company said in a statement Monday.

“We believe a multitude of investors have been eagerly awaiting the launch of a Bitcoin-linked ETF after years of efforts to launch one,” said ProShares CEO Michael Sapir. “BITO will open up exposure to Bitcoin to a large segment of investors who have a brokerage account and are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider and creating a Bitcoin wallet or are concerned that these providers may be unregulated and subject to security risks.”

In an SEC filing in August ProShares said BITO also may invest in Canadian ETFs, other pooled investment vehicles, money market funds and U.S. Treasury Bills.

“For example, the Fund may invest in Purpose Bitcoin CAD ETF, CI Galaxy Bitcoin ETF, and Bitcoin ETF,” the filing stated. “Additionally, the Fund may invest in other pooled investment vehicles that provide exposure to the spot price of Bitcoin. For example, the Fund may invest in Grayscale Bitcoin Trust.”

Meanwhile, CNBC reported that Grayscale Investments now intends on filing a submission to convert GrayscaleBitcoin Trust (GBTC), which has $38.7 billion assets under management into a spot ETF.

SEC Shift

Tuesday’s ProShares BITO debut marks a shift in the SEC’s acceptance of Bitcoin ETFs. While ProShares and several others have sought approval for Bitcoin ETFs since 2017, none has been successful until now.

The U.S. government has toyed with the idea of regulating the digital currency to curb its role in illegal financial activities. Federal regulators are also concerned about Bitcoin’s volatility and the ability for the currency to be easily manipulated. Finally, Bitcoin has also come under fire for its enormous energy consumption.

However, in August SEC Chair Gary Gensler said the agency would not outright ban cryptocurrencies. Instead, he warmed to the idea of ETFs tied to Bitcoin futures, if they complied with a 1940 law that makes investments more transparent for companies like mutual funds.

Currently, the SEC is reviewing three other Bitcoin futures ETFs from Valkyrie, Invesco and Van Eck. Like ProShares, they’ll be allowed to move forward and list 75 days after their paperwork was filed, if the SEC doesn’t intervene before.

On Oct. 5, the SEC approved the Volt Equity ETF. The fund seeks to invest most of its money in companies involved in the Bitcoin industry. It plans to trade under the ticker BTCR.

Additionally, Tad Pak, Volt Equity’s CEO, told Insider that he was considering companies like Microstrategy (MSTR), Marathon Digital and Bitfarms (BITF) as part of the fund’s holdings.

Bitcoin Stocks

MARA stock jumped 5.2% to 51.45, adding to its 12% gain last Friday.

MARA stock has a top-notch 99 RS Rating. Its relative strength line is trending higher and nearing all-time highs, according to MarketSmith.

Rival Riot Blockchain (RIOT) surged 7% to 29.80 on the stock market today. RIOT stock is trading just below its 50-day line.

MSTR stock fell 1.4% on Friday. COIN stock popped 4.5%. On Friday, Coinbase jumped 7.9%, clearing a couple of aggressive entries. Bitfarm stock ran up 4.1% and GBTC fell 3.7%.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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