The headline news purports it to be a safer way to invest in Bitcoin by avoiding unregulated cryptocurrency exchanges and loss-prone Bitcoin wallets.
These are contracts traded on the Chicago Mercantile Exchange, enabling the holder to sell some number of bitcoins at a predetermined price up to six months – or a year – in the future.
Unless the spot price of Bitcoin when the contract is rolled over is higher than the expected future price when the contract was purchased, the ETF will incur a loss.
While that sounds like a deal – you can buy into the commodity at a lower price than it costs today – it really means that its value is expected to decline in the future.
That’s impractical for most commodities such as oil or wheat, but it’s possible for some precious metals such as silver and gold.
With more than $7 trillion currently supporting cryptocurrencies, other mutual fund companies must be drooling at the mouth in anticipation of participating in such a lucrative market.