Breaking News
Black Friday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Bitcoin Eyes Record Highs as Futures-Based ETF Within Sight

CryptocurrencyOct 16, 2021 10:25AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

By Yasin Ebrahim

Investing.com – Bitcoin scaled $60,000 this week and is closing in on all-time highs, amid growing optimism a futures-based bitcoin exchange-traded fund could be approved as soon as next week, and eventually lay out the carpet for a bitcoin ETF.

BTC/USD jumped 8% to $61,097, and is just shy of its all-time of high of 64,778.

The Securities and Exchange Commission is widely expected to green light the futures-based bitcoin exchange-traded funds, or ETFs, proposed by ProShares and Invesco, to start trading next week, CNBC reported late-Friday, citing unnamed sources familiar with the matter. 

The road to bitcoin ETF has been paved with rejections and countless delays, but the prospect of an ETF that holds bitcoin futures, a regulated security, has grown on the SEC in recent months.

“One of the reasons regulators will like a BTC futures-based ETF is the fact that the underlying asset, a BTC futures contract, is already regulated by the Chicago Futures and Trading Commission,” Seamus Donoghue, vice president strategic alliances at Metaco, told Investing.com in an interview on Friday.

What is good for the regulator, however, isn’t necessarily appealing for the long-term investors. Unfortunately, bitcoin futures have a bad reputation as they don’t do a very good job of matching the price performance of bitcoin.

Unlike a spot bitcoin ETF, a bitcoin futures exchange-traded fund doesn’t directly own or hold bitcoin, but rather bitcoin futures.

As a futures contract is an agreement to buy or sell an asset for a set price at a set date, there are added complexities, or costs that need to be factored into the price of futures contract.  

These costs, or “carry” in trading parlance, include interest, financing costs, and storage costs in the case of commodities that lead to a futures price that is higher, or trades at a premium above the spot price of the underlying asset -- a dynamic known as contango.

As bitcoin is increasingly scarce, investors expect the price in the future to be higher than today's price, exacerbating this contango dynamic.

For institutional investors who want to buy and hold bitcoin for the long-term, but aren’t permitted to directly hold BTC, a futures-based bitcoin ETF can lead to significant underperformance – particularly when the price of bitcoin moves sideways.

“If the price of Bitcoin moves sideways, but you've always had very positive premiums in the futures price, you'll have significant losses,” Donoghue said.

Futures, however, aren’t typically used for long-term investing, but rather for speculating, or hedging, the latter of which has proved valuable for bitcoin investors.

"I don't think anybody would say, if you want to a position in an asset class, a long term way to buy and hold is through the futures market," Donoghue said.

A futures-based bitcoin ETF, however, could provide investors with more tools to manage the wild swings in the price of bitcoin, which has a notorious reputation of large 30-to-50% drawdowns.

“One of the issues of crypto for institutional investors has always historically been the difficultly in hedging away some of the volatility or at least manage that volatility,” Donoghue added. "Futures enabled a little bit more risk management around the delta of the underlying risk."

The added flexibility, however, isn’t what has added a spring the step of bitcoin bulls.

The bigger bet for investors is that the successful launch of a futures-based bitcoin ETF could eventually pave the way to a U.S. listed bitcoin ETF, which will not only more closely match the price performance of bitcoin but may open the floodgates to further crypto adoption.  

"I think it's the first step, and probably in the next step, we'll be getting a spot bitcoin ETF, although timing is unknown," according to Donoghue. “A spot bitcoin ETF would be a very close proxy to trading the underlying bitcoin, and provides better access to everybody if its listed."

Bitcoin Eyes Record Highs as Futures-Based ETF Within Sight
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (13)
Paulo Lee
Paulo Lee Oct 17, 2021 10:22AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The suits are going to manipulate the price in their favor
Karim Pazhouhan
Karim Pazhouhan Oct 17, 2021 3:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Rick Miller
Rick Miller Oct 16, 2021 8:54PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Get ready to have your asses handed to you, new buyers..
John Healy
John Healy Oct 16, 2021 6:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I don’t own any Bitcoin so I’m kind of envious toward those of you who’ve made big money, but I do have an honest question: How is cryptocurrency immune to government regulation?
John Healy
John Healy Oct 16, 2021 6:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
lewis martin Thank you! That’s the clearest explanation I’ve seen. It would seem difficult to tax if it’s as anonymous as I understand it to be. I appreciate the response.
Millennial Metals
Millennial Metals Oct 16, 2021 6:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
It isn’t. China just banned all of it
John Healy
John Healy Oct 16, 2021 6:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Millennial Metals I thought they banned the exchanges and limited mining due to the energy shortages.
John Healy
John Healy Oct 16, 2021 6:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
lewis martin Thank you. So, in crypto-to-crypto transactions or crypto-to-cash private transactions without an exchange the government has no way to know who is making them, only the transactions themselves which are seeable on the open ledger, and therefore has no opportunity to extract a tax? I’ll watch for a reply and leave it there. Again, thanks for the response.
John Healy
John Healy Oct 16, 2021 6:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
lewis martin Thanks for taking the time to respond. I’m going to dive a little deeper over the coming days and see if I can start connecting some dots. Your posts helped a lot!
Millennial Metals
Millennial Metals Oct 16, 2021 5:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The cold hard truth is: Bitcoin is nothing. The world doesn’t need it, it produces nothing, consumes exorbitant amounts of electricity… what is the point? It is a giant ponzi bubble and if the price isn’t going up nobody will care about it.
Millennial Metals
Millennial Metals Oct 16, 2021 5:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
lewis martin Fiat is controlled by governments, central banks and militaries more powerful than you can imagine
Ali Kadry
Ali Kadry Oct 16, 2021 3:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
now we will play
compra rapida
compra rapida Oct 16, 2021 2:33PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This ETF don't have real bitcoins, it are futures.
Mohd Izhar Muslim
Mohd Izhar Muslim Oct 16, 2021 12:09PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Safe and sound, this great for me
Rodney Dangerfield
Rodney Dangerfield Oct 16, 2021 12:09PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
it will be a very satisfying day when greed comes back and bites all of you in the bum make sure you find the highest window to jump out of and don't do a boring jump do like flips and stuff
Ethan Strong
Ethan Strong Oct 16, 2021 12:09PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
🥱
Stephen Corsaro
Stephen Corsaro Oct 16, 2021 12:09PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
schadenfreude is a ego trip?
Yakubu Gabriel Stephen
Yakubu Gabriel Stephen Oct 16, 2021 11:30AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
come 2026 Bitcoin will hit 146k.
Aron Munanga
Aron Munanga Oct 16, 2021 10:58AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I have no idea about ETF please l need a brief explanation.
Stephen Corsaro
Stephen Corsaro Oct 16, 2021 10:58AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
An exchange traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same way a regular stock can. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investm
Michael Feeney
Michael Feeney Oct 16, 2021 10:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Nice article… 100K here we come!
Edward Chong
Edward Chong Oct 16, 2021 10:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
and u actually fall for it
Randy Cantu
Randy Cantu Oct 16, 2021 10:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Does anyone know what the etf is going to be called and when does it start trading?? Ticker please??
Tyrone Lander
Tyrone Lander Oct 16, 2021 10:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
BITO
Steffen vdm
Steffen vdm Oct 16, 2021 10:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Bitcoin Is Totally Overvalued?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email