First bitcoin futures ETF rises 3% in its first day of trading on the NYSE

On Tuesday, shares of the first bitcoin-linked exchange-traded fund in the United States gained marginally in their first day of trading. The ProShares Bitcoin Strategy ETF (ticker: BITO) was up roughly 3% at the time of writing. The fund invests in CME bitcoin futures, which are contracts that speculate on bitcoin's future price rather than the cryptocurrency itself. Its purpose is to provide market participants with access to the bitcoin market, as well as a way to hedge and gain direct exposure to bitcoin pricing.

As a result, investors in the ETF should anticipate that the price and performance of the shares would diverge from the price of bitcoin. Existing investors will be disappointed; many of them have a long-term outlook on cryptocurrencies and had anticipated for an ETF that would track physical bitcoin that investors could buy and hold.

According to Coin Metrics, the price of bitcoin was slightly higher Tuesday morning, up 2% to $62,864, close to its all-time high of 64,899 set on April 14th. Bitcoin futures also increased by roughly 2%.

“The fund seeks to provide capital appreciation primarily through managed exposure to bitcoin futures contracts. The fund does not invest directly in bitcoin,” according to the ProShares website. The fund has a 0.95 percent cost ratio.

According to ETDB.com, ProShares is the eighth-largest ETF provider in terms of assets. The firm is recognised for its leveraged funds, which track changes in specific indexes amplified by a given amount. ProShares officials rang the NYSE's opening bell, signalling the start of trading for the ETF.

For years, the crypto sector has yearned for a bitcoin-related ETF. Asset managers began proposing to launch spot bitcoin ETFs around 2017, but the Securities and Exchange Commission rejected all applications, claiming that none could demonstrate market resistance to manipulation. This year, shortly after Chairman Gary Gensler assumed control of the agency, a flood of applications for futures-based ETFs flooded in.

“What 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,” Gensler told CNBC’s ‘Squawk on the Street’ Tuesday. “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.”

Some claim that the use of cryptocurrency by businesses and fintechs reduces the impact of an ETF, particularly one linked to futures contracts. Through institutional-grade funds, financial apps like PayPal and Square's CashApp, or crypto-related equities like Coinbase and mining stocks, investors can obtain indirect exposure to bitcoin without really owning it.