The ProShares Bitcoin Strategy ETF posted a sharp rise in inflows when it launched last week, making it the fastest ETF ever to hit $1 billion in assets.
- In a note last week, JPMorgan was concerned that the futures-based ETF has a major flaw that could lead to reduced returns for its investors when the fund grows too large.
- That’s because the ETF is not backed by its own bitcoin as its underlying assets. Alternatively, the ETF owns derivatives of bitcoins that try to match the return profile of the crypto via futures contracts.
- SEC Chairman Gary Gensler has continually resisted calls for approval of a spot bitcoin ETF rather than favoring the futures-based fund.
- According to JPMorgan, the average annual cost to roll over futures contracts was nearly 9% since mid-2019, almost 10X the ProShares Bitcoin Strategy ETF’s annualized expense rate of 0.95%.
If the ETF does not obtain its waiver from the CME, it could eventually move away from its futures strategy and invest in equities with exposure to crypto to effectively track the price of bitcoin.
BTC USD down -1.57%
Source: Markets Insider