The First Bitcoin ETF Is Here—What Are the ProShares Bitcoin ETF’s Holdings?

After years of asset managers trying—and failing—to get the SEC to approve their Bitcoin ETFs, one has finally succeeded. The ProShares Trust Bitcoin ETF is set to begin trading on the NYSE on Oct. 19, 2021.

While the SEC did not announce the approval, both the exchange and the company managing the fund have confirmed the forward movement for Bitcoin-related securities.

SEC Chairman Gary Gensler has been vocal about his aversion toward the cryptocurrency market. Gensler cites crypto's use in illicit activity as a strong reason regulation is so key.

Despite this, the SEC has officially approved the first-ever Bitcoin ETF. This move is all the more impressive considering the commission has denied countless Bitcoin ETFs and delayed approval timelines for many others.

The ProShares Bitcoin Strategy ETF will trade on the NYSE under the ticker symbol "BITO". ProShares describes its fund as "the first U.S. Bitcoin-linked ETF offering investors an opportunity to gain exposure to bitcoin returns in a convenient, liquid and transparent way." The fund's goal is to provide capital appreciation through managed exposure of Bitcoin futures contracts.

The fund will launch with $20 million in net assets, a nominal amount compared with the global ETF market's value of at least $7.74 trillion. BITO's expense ratio will be rather high, at 0.95 percent. This is due to the fund's experimental nature and niche category.

The ProShares Bitcoin Strategy ETF does not invest directly in Bitcoin. Instead, it offers exposure to Bitcon futures. ETFs offer underlying assets. Those assets can be futures contracts, which are contracts that exchanges such as the Chicago Board of Trade or New York Mercantile Exchange trade, track, and monitor. Futures contracts are based on the prediction of a specific price on a certain date.

ProShares says, "The price and performance of Bitcoin futures should be expected to differ from the current 'spot' price of Bitcoin." This means that the fund's performance won't necessarily reflect the coin's market value and could, in fact, differ by a lot.

This isn't ProShares' first futures ETF. The company also operates the ProShares Managed Futures Strategy ETF (FUT). Launched in Feb. 2016, FUT has gained just 1.3 percent since its inception and is currently about 6.8 percent above its lowest price, which it reached in Feb. 2020. Due to the volatile nature of Bitcoin, BITO could have much stronger ups and downs than FUT.

As of Oct. 18, 2021, a single Bitcoin was worth $61,892.40. The coin has enjoyed 27.7 percent growth over the past month, making up for losses earlier in the year. As BITO prepares to hit the public market, investors are hoping that Bitcoin futures will stay strong enough to attract investor interest. Steadfast crypto investors are excited about the Bitcoin ETF, but those on the fence may wait to see how BITO performs before they invest.