According to some analysts, the Bitcoin Investment Trust could drive the use of the virtual currency by investors, the Wall Street Journal reports.
BIT commenced trading on the OTCQX market on May 4 under the GBTC symbol. Technically, it cannot be called an exchange traded fund as it lacks the approval of the Securities and Exchange Commission, but it will work like one.
Sponsored by Grayscale Investments, the fund got the permit of FINRA (Financial Industry Regulatory Authority) and became the first publicly traded cryptocurrency fund.
Currently, the SEC is reviewing an application for the Winklevoss Bitcoin Trust, which is set to become the first official cryptocurrency ETF.
Bitcoin’s price depends completely on the people’s trading activity, what makes it a highly speculative asset. The majority of financial experts advise bitcoin investors not to spend more money they are ready to lose.
By the end of June, BIT’s net asset value amounted to just $35.6 million with 1.4 million shares outstanding. The share price decreased to $30.12 from $42 on the first trading day.
Meantime, some analysts warn that the fund could incentivize speculative interest in the digital currency and compare it with the opening of the gold exchange traded funds in precious metals more than ten years ago.
Wedbush Securities analyst Gil Luria considers the launch of BIT will help to bring bitcoin to the mainstream. Besides, it will let anyone to acquire the digital currency.
“The OTCQX listing is also a very big step forward. It has made at least a proxy ownership stake in bitcoin available to practically every institutional and retail investor,” says Luria.
One of the Winklevoss Bitcoin Trust founders, Cameron Winklevoss, recalls the SPDR Gold Shares ETF, which got very popular since its launch in 2004. At first, gold futures were trading at around $400 an ounce and quintupled in the following seven years.
“Investors historically have chosen to offload the friction of buying and securing gold directly for a reasonable fee,” says Winklevoss. “We believe some investors will behave the same with regards to bitcoin and a bitcoin [exchange-traded product].”
By ETF standards, the fund has high fees, which total 2%. It is also expected to compete with the Winklevoss fund.
Eric Marshall, a portfolio manager for mutual-fund company Hodges Capital Management says: “I think a bitcoin ETF says as much about the popularity of ETFs as it does about the popularity of bitcoin. Now there’s an ETF for everything.”
The WSJ notes that while bitcoin’s volatility is still very high, there are reasons to believe its use could rise. According to the Goldman Sachs survey, 44% of 752 millennials confirmed they utilize or will utilize the digital currency. More than 100,000 merchants accept bitcoin as a means of payment.