Futures-based Bitcoin ETFs and Funds

Investors can gain exposure to Bitcoin via Bitcoin industry equity... Investors can gain exposure to Bitcoin via Bitcoin industry equity funds, Bitcoin spot funds, and Bitcoin futures funds. Bitcoin futures funds own derivative contracts tied to the price of Bitcoin futures. These derivatives typically trade on the CME Group’s exchange, as well as exchanges such as MEXC, Kraken, OKX, Binance, Gate.io, and Bybit. Investors often opt for trading Bitcoin futures, particularly through a major exchange like the CME, because it offers them a regulated environment for cryptocurrency exposure. This provides institutional investors, who form the bulk of traders in these contracts, with a higher level of confidence and a clear path for recourse. Another advantage to Bitcoin futures is the ability to speculate long, or short, on the price of Bitcoin. Bitcoin futures may also have higher volatility than the spot price, which can be a plus or minus, depending on how aggressive a Bitcoin fund is. A notable potential downside to Bitcoin futures is tracking error, which occurs when the price of Bitcoin futures deviates from the price of spot Bitcoin. Another risk is something called “contango”, when a Bitcoin futures contract for near-term settlement is lower than a contract further out. For funds that “roll” Bitcoin futures (sell an expiring month contract for a later-dated one), this can impose a cost—because they are selling low and buying high. As a result of these risks, Bitcoin futures funds are only appropriate for aggressive investors. Last Updated: 05/08/2024 View more View less

Investors can gain exposure to Bitcoin via Bitcoin industry equity funds, Bitcoin spot funds, and Bitcoin futures funds. Bitcoin futures funds own derivative contracts tied to the price of... Investors can gain exposure to Bitcoin via Bitcoin industry equity funds, Bitcoin spot funds, and Bitcoin futures funds. Bitcoin futures funds own derivative contracts tied to the price of Bitcoin futures. These derivatives typically trade on the CME Group’s exchange, as well as exchanges such as MEXC, Kraken, OKX, Binance, Gate.io, and Bybit. Investors often opt for trading Bitcoin futures, particularly through a major exchange like the CME, because it offers them a regulated environment for cryptocurrency exposure. This provides institutional investors, who form the bulk of traders in these contracts, with a higher level of confidence and a clear path for recourse. Another advantage to Bitcoin futures is the ability to speculate long, or short, on the price of Bitcoin. Bitcoin futures may also have higher volatility than the spot price, which can be a plus or minus, depending on how aggressive a Bitcoin fund is. A notable potential downside to Bitcoin futures is tracking error, which occurs when the price of Bitcoin futures deviates from the price of spot Bitcoin. Another risk is something called “contango”, when a Bitcoin futures contract for near-term settlement is lower than a contract further out. For funds that “roll” Bitcoin futures (sell an expiring month contract for a later-dated one), this can impose a cost—because they are selling low and buying high. As a result of these risks, Bitcoin futures funds are only appropriate for aggressive investors. Last Updated: 05/08/2024 View more View less