New ETF lets investors dip their toes in bitcoin market

The price of bitcoin topped $60,000 on Monday as the nation's first exchange-traded fund tied to the cryptocurrency prepared to make its market debut.

ProShares plans to launch the first bitcoin-linked ETF in the U.S. on Tuesday on the New York Stock Exchange under the ticker "BITO," the Bethesda, Maryland asset manager said on Monday. The financial product could appeal to investors who are used to buying stocks through brokerage accounts, but who are averse to trading cryptocurrencies. 

"We believe a multitude of investors have been eagerly awaiting the launch of a bitcoin-linked ETF after years of efforts," ProShares CEO Michael Sapir said in a news release. The new ETF will offer a venue to bitcoin to investors with a brokerage account who might otherwise not want to venture into unregulated terrain, he added.

The ETF will invest mostly in bitcoin futures contracts and not directly in the cryptocurrency itself. That means the fund will invest in bets on where the digital coin will be priced in the future. The market is overseen by the Commodity Futures Trading Commission, or CFTC. 

For years, applications to launch a bitcoin ETF have been delayed or denied by the U.S. Securities and Exchange Commission. But SEC Chair Gary Gensler recently signaled that the agency might allow crypto ETFs based on futures rather than the digital coin itself.

In a June bulletin to investors, the SEC and CFTC urged investors whose holdings are exposed to the bitcoin futures market to weigh the risks carefully, calling it a "highly speculative investment."

Beyond market volatility — the value of bitcoin more than doubled from less than $30,000 to almost $65,000 in the course of three months earlier this year — investors should weigh "the lack of regulation and potential for fraud or manipulation in the underlying Bitcoin market," the regulatory alert stated.

The price of bitcoin has more than doubled in 2021, and some investors view it as a refuge from some of the economic forces that can buffet stocks, bonds and other mainstream assets.

China's government last month banned all transactions involving cryptocurrency, and a Bank of England official last week warned the lack of regulation of cryptocurrencies could lead to an economic crash. 

The Associated Press contributed to this report.