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First U.S. Bitcoin-linked ETF jumps in trading debut

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Simeon Hyman, ProShares Global Investment Strategist, joins Yahoo Finance from the floor of the New York Stock Exchange for the trading debut of the company's Bitcoin futures ETF.

Video Transcript

AKIKO FUJITA: The first Bitcoin futures ETF making its big debut on the New York Stock Exchange today. ProShares Bitcoin Strategy ETF here pushing higher, up about 3%. Now BITO is the ticker we are looking at. So let's bring in Simeon Hyman, ProShares global investment strategist. And Simeon, I know you're on the floor there. Certainly, a very exciting day for the space.

We should mention this tracks, of course, Bitcoin futures contracts, not necessarily the price of Bitcoin. Talk to me about why ProShares decided to go this route because I think there's a lot of purists out there that maybe are a little disappointed that this is not an ETF that allows investors to invest directly into Bitcoin.

SIMEON HYMAN: Sure, well, I'd like to turn that narrative a little bit on its head because we actually think that the futures approach is a very robust one. So ticker BITO, which traded-- which started trading today, indeed, brings to the market the first opportunity to invest in a Bitcoin-linked ETF. And it is belt and suspenders. So you're in the regulated futures market, and then you're also in that regulated 1940 Security Act ETF, so you've got the convenience of being able to put that in your brokerage account.

But we think it's a very robust solution as well, not just convenient. There are more and more experts who've been writing of late that the futures market is, in fact, a better place for price discovery than the spot market. As an example, the CME futures exchange actually trades 40% more volume than the largest US Bitcoin exchange. So if anything, the information is really flowing very, very robustly into the pricing of those futures.

ZACK GUZMAN: Yeah, Simeon, I mean, I guess when we look at it, you know, there's a lot of people pooh poohing it because of the cost of carry and things like that when we're talking futures. But at the same time, as you said, a lot of liquidity here.

How does it track, though? I was trying to look it up, but there's so much demand, I think, ProShares website was having some problems with so many people hitting it today. When you look at maybe how people should expect this to work, what's kind of the diversification requirements? Because this is a 40 Act ETF versus the 33 ones that people want in terms of what Akiko was mentioning, spot Bitcoin there. So what's it look like in terms of how you're tracking Bitcoin's price?

SIMEON HYMAN: Well, the good news is we've got a real life example. We launched BTCFX, a mutual fund using a very similar futures-based strategy back in July. And if you look at its performance-- and look, it's not 30 years, it's just three months. But it's live, and in that time period through last Friday, the Bitcoin reference rate-- and that's an amalgamation of several exchanges' prices.

Remember, you can't invest in the thing in the corner of your screen anyway, but the Bitcoin reference rate is a good measure. And over that time period through Friday, it was up 51%. BTCFX, our mutual fund running the future strategy, was up 52%. Interestingly, GBTC, the Grayscale trust, was up 37. So there's some evidence of how it's been tracking in live form and the ETF now trading today, following the similar futures-based strategy.

AKIKO FUJITA: Yeah, Simeon, talk to me about-- I mean, you just mentioned the interest level there, but where that's coming from right now, what do the inflows look like?

SIMEON HYMAN: You know, I don't think we know where it's coming from, but what we do think is that it's really a robust solution for many different constituents. We certainly do think that there have been people waiting to be able to put Bitcoin into their regular brokerage account. And this is a powerful diversifier. We know it's got volatility, but volatility, to some extent, is a feature, not a bug. You want a little bit of that in your portfolio such that you have the diversification benefits or an inflation hedge as an alternative to currency or virtual gold.

So certainly, buy and hold folks in a portfolio allocation, but we know the traders are going to be there, too. And you want both, because you want the trading community utilizing it to make sure that the market for Bitcoin as a whole and the ETF becomes more and more liquid and robust over time. But you also now have the opportunity for people who've been waiting for the convenience of an ETF to be able to utilize it for longer term strategies as well.

ZACK GUZMAN: Yeah, I guess it does kind of get to the point of who it's for, right? Because with Bitcoin, you could go out there and buy it, as you said, on some of the larger exchanges if you wanted to own Bitcoin outright. So I mean, when you're targeting this, it sounds like, does it skew to an older consumer, maybe one who just doesn't want to even take the time to figure out how to hold and custody Bitcoin themselves?

SIMEON HYMAN: I will ignore the age-ist comment, but I think it is absolutely true that there is a substantial constituency out there that just didn't want to have to start to figure out how the exchanges worked, open up a different account. Warm key, cold key, what key? What's in my wallet? Indeed, we do think that that's a solution for the folks who didn't want to get involved in that, whether they're old, young, or anywhere in between.

AKIKO FUJITA: Simeon, I wonder how you look at this in the grand scheme of this discussion around Bitcoin ETFs. As we said, this isn't exactly sort of in the form that some maybe would have wanted, but this is a huge milestone. I mean, Bitcoin futures ETF, the very first launch at a time when the SEC is considering some other ETFs and whether, in fact, they can move forward, too. How do you see this as a big milestone?

SIMEON HYMAN: This is a huge milestone. There was really no real convenient way to get Bitcoin exposure before today. And, you know, this goes down in the history of the first gold ETF, the first bond ETF. This really is an important milestone. But of course, there will be a continued evolution of the Bitcoin and cryptocurrency space. And at ProShares, innovation is at the heart of what we do. So we're going to continue to watch the evolution of Bitcoin cryptocurrency and the regulatory environment. And if we see other opportunities to deliver solutions, we'll be looking at those as well.

ZACK GUZMAN: One last one here from me, Simeon, when we look at the inflows today, more than $400 million, on track for one of the best opening performances for ETFs of all time. Obviously, one day doesn't create the whole story here, but I mean, how does that compare to maybe what you were expecting, based on what you heard before it launched, and also, what you might expect in the future, given the fact that we could see Valkyrie as one approved as early as tomorrow, aptly ticker named BTFD? I mean, how do you see it stacking up as we move forward?

SIMEON HYMAN: We certainly are optimistic. Not only are we first, but we think we did it right and in a real robust manner that folks, for a long time, will find important utility of it. And we certainly welcome others to the party as well.