Diksia.com - Bitcoin is the most popular and valuable cryptocurrency in the world, but investing in it can be challenging and risky. Buying and storing bitcoin requires a digital wallet, a secure platform, and a lot of technical knowledge. Moreover, bitcoin is highly volatile and subject to hacking, theft, and regulation issues.
That’s why many investors are looking for alternative ways to gain exposure to bitcoin without owning it directly. One of the most recent and innovative options is BITO, the first bitcoin futures ETF in the US.
What is BITO?
BITO is the ticker symbol for the ProShares Bitcoin Strategy ETF, which was launched on October 19, 2021, by ProShares, a leading provider of exchange-traded funds (ETFs). BITO is the first ETF in the US that tracks the price of bitcoin futures contracts, rather than the spot price of bitcoin itself.
An ETF is a type of investment fund that trades on a stock exchange like a regular stock. It usually holds a basket of assets, such as stocks, bonds, commodities, or currencies, and aims to replicate the performance of an underlying index or market. ETFs are popular among investors because they offer diversification, liquidity, low fees, and tax efficiency.
A futures contract is a type of derivative that allows two parties to agree on the price and date of a future transaction of an asset. For example, a bitcoin futures contract is an agreement to buy or sell a certain amount of bitcoin at a specified price on a specified date in the future. Futures contracts are traded on regulated exchanges, such as the Chicago Mercantile Exchange (CME) or the Bakkt Exchange.
BITO invests in bitcoin futures contracts that are listed on the CME, the largest and most liquid bitcoin futures market in the world. BITO does not hold any bitcoin directly, nor does it use any other cryptocurrency-related assets, such as trusts, funds, or companies. BITO only uses cash and cash equivalents to collateralize its futures positions.
How does BITO work?
BITO aims to provide investors with exposure to the changes in the value of bitcoin, as measured by the performance of the CME CF Bitcoin Reference Rate (BRR). The BRR is a daily benchmark price that reflects the average price of bitcoin across major spot exchanges between 3:00 p.m. and 4:00 p.m. London time.
