|ProShares Bitcoin Strategy ETF||$ 36.50||Buy stocks|
It has finally happened. After years of back and forth between fund issuers and regulators, an agreement was finally reached and Proshares was able to launch its Bitcoin Strategy ETF under the ticker symbol BITO. While not technically the first Bitcoin ETF, BITO is a turning point for cryptocurrency as a true Bitcoin futures product now trades on major US exchanges.
How has the ETF been received by the markets? Like a king. The fund posted nearly $ 1 billion in volume on its first day of trading as investors poured in. For many, this was their first chance to gain exposure to Bitcoin, as institutional fund managers typically cannot load a Coinbase Global Inc. (NASDAQ: COIN) account with client capital. Anyone can now buy shares of the ETF (or options, if you want), but you’ll have to consider whether the best use of your own capital is to buy that ETF or just buy Bitcoin (BTC). at the spot price.
How to buy Proshares Bitcoin Strategy ETF (NYSE: BITO)
BITO is not the first attempt at a cryptocurrency ETF. For example, the ETF Bitwise Cryptocurrency Innovators (NASDAQ: BITQ) also currently trades on US exchanges, but it invests in public companies exposed to Bitcoin and crypto, such as Coinbase Global Inc. (NASDAQ: COIN) and MicroStrategy Inc. (NASDAQ: MSTR). BITO buys Bitcoin futures contracts and holds them until there is a need to roll them over as expiration approaches.
It is important to note that BITO does NOT directly own Bitcoin. No cryptocurrency resides in its wallet. Instead, the fund uses futures contracts to attempt to mimic the price movements of BTC, but as most derivatives traders will tell you, futures and spot prices don’t always line up. . Just make sure you understand how this product actually works before you invest tons of capital in it.
Step 1: Choose a brokerage.
One of the main advantages of launching this type of ETF is that investors can now own it through the same broker that they use for their retirement accounts, taxable accounts and other investment vehicles. If you are not a fan of cryptocurrency exchanges like Coinbase and Gemini and don’t feel like opening an account with a broker like Robinhood Markets Inc. (NASDAQ: HOOD) or Webull, you can now get exposure to Bitcoin through traditional brokers.
Do you already have a preferred broker or are you looking to open a new account? If it’s the latter, take a look at Benzinga’s favorite brokers list here.
Step 2: Decide how many shares you want.
Once you have established your trading account with a broker with BITO shares, you will need to determine how much to buy. While ETFs are generally considered to be safer investments than individual stocks, BITO is a special case because it is an investment product that holds cryptocurrency derivative contracts. It’s not your mom and daddy’s SPY or QQQ. Take your risk tolerance and exposure to other cryptocurrency products into account before deciding how many stocks to buy. Never devote too much capital to a single issue.
Step 3: Choose your order type.
Buying stocks isn’t as easy as pressing a button or touching a screen. You will need to decide how to order your stocks, and this is usually done via 2 choices: a market order or a limit order. A market order will immediately execute your trade at the best available market price. A limit order allows you to set a price that will trigger the activation of the order when it is reached. For example, if you entered a limit order for BITO shares at $ 42, the order will remain inactive until BITO shares reach $ 42, and then it will be executed. Limit orders allow you to enter trades at ideal prices without keeping an eye on the stock all the time.
Step 4: Execute your transaction.
Once you have decided on a trading strategy, you will need to find a great entry point to start your position. This is where technical analysis comes in handy. By using concepts like support and resistance, you can execute your trade with precision and maximize your returns. Sure, getting stocks at $ 44.50 instead of $ 44.75 might seem like a small gain, but when you buy in volume those quarters can add up.
Proshares Bitcoin Strategy ETF History (NYSE: BITO)
The ETF started trading on October 18, 2021 at a price of around $ 40 per share. It peaked at around $ 44 in its early trading days, as institutional and retail investors gobbled up stocks like a hungry dog who found the Thanksgiving turkey unattended. At the time of this writing, the ETF already had over $ 1.2 billion in assets under management.
BITO has little history to speak of, as the US Securities and Exchange Commission (SEC) only approved its launch in the last month. The question of who would market the first Bitcoin ETF was a long prophesied question, and now ProFunds (the parent company of Proshares) is the declared winner. Of course, other BTC and cryptocurrency related products will certainly follow, some of which may even have real coins in the wallet. But for now, BITO has the house to itself (so to speak).
Proshares Bitcoin Strategy ETF (NYSE: BITO) Restrictions for Retail Investors
Retail investors had few options for exposure to cryptocurrency prior to the launch of this product. Most brokers weren’t interested in being the cryptocurrency custodians, and investors were forced to open accounts on crypto-specific exchanges.
But now anyone with an account at a traditional brokerage firm can add Bitcoin exposure to their portfolio through BITO. You can even own it in a tax-efficient account like an IRA or Health Savings Account (HSA). Cryptocurrency with advantageous tax treatment? It’s a win-win solution for many retail investors.
Pros and Cons of the Proshares Bitcoin Strategy ETF (NYSE: BITO)
|Access to Bitcoin via traditional exchanges||Expensive to own compared to other ETFs|
|Add legitimacy to the cryptocurrency industry in the eyes of public market participants||The fund does not hold any real Bitcoin; only Bitcoin futures contracts that are renewed as expiration approaches|
|Can now buy a BTC-linked investment product in tax-sheltered accounts like IRAs||Many retail investors without compliance restrictions would be better off owning Bitcoin|
BITO is the first of its kind
The ETF ProShares Bitcoin Strategy has indeed entered the market with a ton of pomp and circumstance, but for most of those already deeply into crypto, it’s nothing more than a headline. BITO is giving a new class of investors exposure to the cryptocurrency industry, but most interested parties have already invested directly in digital currencies through apps like Coinbase, Gemini, Robinhood or Webull.
And since futures don’t always behave the same as spot price, most investors would be better off just owning Bitcoin directly. You will pay a commission and fees if you use a cryptocurrency exchange, but you will directly own the asset and not have to worry about complex derivative structures or expense ratios weighing on profits.
Frequently Asked Questions
What does BITO have?
BITO does not actually own any Bitcoin or cryptocurrency directly. Instead, it buys and renews Bitcoin futures contracts, which are derivatives based on the spot price of BTC but don’t always track that price in parallel. BITO also has to constantly renew contracts, which increases expenses and can cause headaches for investors who do not understand how futures contracts work.
Is investing in BITO risky?
Is investing in BITO risky?
Cryptocurrency is a relatively new asset class and prices can be extremely volatile in the short term. Although ETFs are generally considered to be less volatile than stocks and individual derivatives, BITO still comes with risk as futures contracts can also be volatile and a Bitcoin futures ETF is uncharted territory for market participants.
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