NEW YORK (AP) – Bitcoin’s public profile grew six months ago when the first exchange-traded product linked to it hit the market.
It only took two days for the fund, the ProShares Bitcoin Strategy ETF, to raise more than $1 billion. This is despite the fact that the fund, which often goes through the ticker symbol BITO, does not hold bitcoin itself. Instead, it invests in bitcoin futures, a regulated market where traders bet on the direction of the cryptocurrency in the coming months.
But BITO has allowed investors to transact with bitcoin without having to learn how to hold a cryptocurrency.
Michael Sapir, CEO of ProShares, recently spoke with The Associated Press about the fund’s inception, what types of investors it serves, and how bitcoin has fallen short of one of its initial investor offerings. Conversation has been edited for length and clarity.
Q: What do you personally think of cryptocurrencies? How big is the deal, say, 30 years from now?
A: The truth is, no one knows. My view is that within 30 years, cryptocurrencies will either be an essential part of the financial system and an integral part of our daily lives, or cryptocurrencies will be a distant memory for most people, and their history will be taught in business schools.
Q: Do you own any cryptocurrency personally?
A: I don’t do it personally. But my 15 year old son does. Within the past six months, he has become interested in investing in cryptocurrencies, along with his friends.
Honestly, there are some of the most esoteric cryptocurrencies out there that he taught me a thing or two about.
Q: Were you expecting a big debut like BITO?
A: The introduction has already exceeded our expectations. A good amount, especially the first day. We’ve been watching the trading volume, from the moment the bell rang on the New York Stock Exchange. I would look at the screen on the stock exchange floor, and every minute after launch, we would see tens of thousands if not hundreds of thousands of shares traded.
Q: Do you have an idea about these investors? Are they young or old? Large institutions or small investors?
A: We do not have a direct relationship with the shareholders, since the securities are traded on the New York Stock Exchange.
But about 16% of Americans have at some time purchased cryptocurrency. We think a large part of the other 84% are afraid of the prospect of trying to figure out how to get exposure to cryptocurrency and don’t want to open a private account to do that and then figure out how to hold crypto.
Venturing into the world of cryptocurrency can be intimidating and intimidating. We think the main reason BITO has been so successful is that it removed so many of those complexities and concerns.
Q: So the people who buy your fund are completely different from the average crypto investors?
A: Cryptocurrency investors tend more towards people who are willing to be early adopters and willing to take risks. I think BITO investors might be similar to these investors, but we think BITO might take over investors who might be hesitant about crypto because they can easily access bitcoin exposure through their already existing brokerage account and buy it the way they are used to buying stocks and exchanging money traded .
One of the advantages we see with BITO is that if you have an IRA, or if you have a 401(k) account with a brokerage window, you have an easy way to get Bitcoin by buying a fund like BITO.
Q: The playing field for bitcoin was that it would protect the investor’s nest egg by not always moving up and down in the same direction as the stock, providing diversification. But this has not been the case in recent months. Will it scare people away?
A: I think you are right in the very recent past. Bitcoin appears to be correlated with stock movements. I don’t know if this is a permanent condition. There have been long periods in the past where the performance of Bitcoin was unrelated to stocks and bonds.
There seem to be two types of investors in cryptocurrency. The first type are the long-term holders who believe that the cryptocurrency will rise in value and hopefully provide diversification to their portfolio. The second type of investor is a short-term investor who does not care whether it is related to other securities or whether it is diversifying a portfolio. They are trying to take advantage of short-term moves in the cryptocurrency markets.
Q: One of the criticisms of BITO is that it invests in bitcoin futures, not bitcoin itself. Do you feel that customers understand the difference?
A: In our communications, we made it clear that BITO invests in bitcoin futures, and not directly in spot bitcoin. However, there has been approximately 0.99 percent correlation with spot bitcoin in futures since our launch, and performance since our launch has been close to determining bitcoin itself.