Back to the futures... Big day for crypto: Today the first-ever Bitcoin-linked ETF is expected to start trading on the New York Stock Exchange. Refresher: ETFs, or exchange-traded funds, traditionally track an index (like the S&P 500), a sector (such as tech), a commodity (like oil), or other assets. In this case, the new ETF will track Bitcoin futures. It’s the first Bitcoin futures ETF that the SEC will allow on the market. Breaking it down:
- Futures, aka futures contracts, are agreements to buy or sell an asset in the future at a specific price. In this case, futures let investors speculate on BTC's future price.
- Because this ETF tracks futures, it doesn't invest directly in Bitcoin — and its performance could differ from BTC's actual price.
So much future... The launch of this ETF is a milestone for the crypto industry, which has struggled to gain acceptance in the tightly regulated financial space. About 14% of people in the US — mostly high-income men — own cryptocurrency, according to Gemini’s 2021 “State of US Crypto” report. BTC futures could make crypto more accessible to a wider base who might not have invested in crypto.
- BTC exposure, minus the BTC: Futures give investors exposure to Bitcoin without having to hold or exchange the crypto. No Bitcoin wallet required.
- Regulated alternative: BTC futures are traded on a regulated exchange, which may offer some investors more confidence than directly investing in unregulated Bitcoin.
- Wider access: Investors with regular brokerage accounts can access BTC futures ETFs without having to create an account with a crypto provider.
The next step in crypto "mainstreamification"... could be futures. Two-thirds of US adults who don't own crypto are "crypto-curious,” according to Gemini. Three additional Bitcoin futures ETFs are expected to launch this month, with others in the pipeline. What the crypto industry ultimately wants: funds that invest directly in crypto. So far, the SEC has shot all of them down.