"ProShares Bitcoin Strategy ETF (BITO) is the first U.S. bitcoin-linked ETF". It offers investors "an opportunity to gain exposure to bitcoin returns in a convenient, liquid and transparent way". However, "the fund does not invest directly in bitcoin". It "seeks to provide capital appreciation primarily through managed exposure to bitcoin futures contracts".
This, according to BITO's own words.
In other words, the ETF is a derivative of a derivative that's merely tracking the price of Bitcoin. As noted back in early 2018, Bitcoin futures don't settle in Bitcoin, so they don't affect the supply and demand of Bitcoin itself.
This means that the ETF doesn't directly affecting the price of Bitcoin. However, it does have an indirect effect, because any money put into the ETF, which would otherwise have been put directly into Bitcoin, is directed away from the demand side of the Bitcoin market.
The net effect of the ETF will be the same as that of Bitcoin futures. It directs money away from the demand side of the Bitcoin market. The result of this, back in 2018, was that the price of Bitcoin fell from almost $20,000 to around $3,000 over the next two years. Something similar may well happen this time around, with the introduction of Bitcoin ETFs.
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| Train wreck |
By Photo credited to the firm Levy & fils by this site. (It is credited to a photographer "Kuhn" by another publisher [1].) - the source was not disclosed by its uploader., Public Domain, Link
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