The first-ever Bitcoin exchange traded fund (ETF), offered by ProShares, launched on Tuesday this week. It is trading under the ticker symbol BITO and will allow stock investors to gain exposure to the digital currency without actually buying it on a crypto exchange.
How and where to buy the Bitcoin ETF
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What is the Bitcoin ETF?
Before buying the Bitcoin ETF (BITO), we must first make the distinction between Bitcoin and Bitcoin futures. In essence, a futures contract for any asset is merely an agreement to buy or sell the asset at a future date and at a pre-determined price.
Now, buying the Bitcoin ETF means you are buying a stock that fluctuates in value based on the price of Bitcoin futures that trade on the Chicago Mercantile Exchange.
Should I buy Bitcoin ETF today?
Many professional money managers agree that it is a reasonable strategy to invest no more than 5% to 10% of your total portfolio in crypto assets. Buying the new Bitcoin ETF BITO is ideal for many investors that want exposure to Bitcoin but don't want to go through the process of opening a crypto account.
Bitcoin ETF price prediction
According to experts with Fundstrat Global Advisors, Bitcoin's price could pass $166,000 by the end of 2021. However, the price of Bitcoin doesn’t necessarily correlate with the ETF price, causing some confusion.
This is because futures contracts are not directly backed by physical Bitcoin, rather it is a derivative of Bitcoin. For example, Bitcoin might gain 40%, but the Bitcoin ETF might only rise 30%. That’s because futures ETFs hold contracts that periodically expire and have to be repurchased.