Investors who don’t want to own Bitcoin through a digital wallet or exchange now have a new option: a mutual fund. The Bitcoin Strategy ProFund launched on Wednesday as the first open-end U.S. mutual fund tracking Bitcoin prices. ProFund’s minimum investment is $1,000.
The fund invests in front-month futures contracts on the Chicago Mercantile Exchange. The idea: roll over expiring contracts into new ones for the following month. Say the spot price of Bitcoin is $39,750. A front-month Bitcoin contract, expiring in late August, might cost $39,850. The fund profits if it buys the contract and prices top $39,850. On anything less, the fund loses money.
One hitch: Futures aren’t tax-efficient, and the fund could saddle investors with taxable gains, even if Bitcoin prices don’t budge. Moreover, the spot price may diverge from the futures. “It’s not exactly the same thing,” says Simeon Hyman, ProShares head of investment strategy. While spot and futures prices match up closely on a daily basis, that doesn’t account for fees, taxes, or other costs. The prospectus says that investors shouldn’t expect gains (or losses) correlated precisely to Bitcoin prices.
Bitcoin Strategy is unlikely to be the only option. Several companies are trying to get a Bitcoin exchange-traded fund approved, though the Securities and Exchange Commission is going slow on that. Grayscale Bitcoin Trust also aims to convert to an ETF. “Bitcoin futures have been trading for a while, but putting them in a mutual fund changes the game for advisors,” says Bitwise Asset Management Chief Investment Officer Matthew Hougan. “This is an important milestone.”
Last Week
Start Higher, End Lower
Bitcoin bounced, stocks hit new highs, then sold off before the big techs— Microsoft, Alphabet, and Apple —handily beat their numbers. The Federal Reserve met, talked, cited economic “progress,” and said a taper was possible this year. Growth disappointed but consumer spending surged. Amazon.com results suggested online spending had slowed. And, as usual, the Covid-19 variant lurked. On the week, the Dow Jones Industrial Average fell 0.36%, to 34,936.13; the S&P 500 lost 0.37%, to 4395.29; and the Nasdaq Composite was off 1.11%, to 14672.68.
Crackdown Continues
China reined in its $100 billion private-tutoring industry, arguing that its high costs limit Beijing’s push to convince families to have more children. Officials demanded that the companies operate as nonprofits, adhere to fee standards, and have no foreign ownership. The top Chinese securities regulator then privately told foreign investors that market impacts would be considered in future moves. SoftBank Group may be selling more of its Uber Technologies stake, after taking losses in China.
Rocky Road
The Senate took several steps forward toward a trillion-dollar infrastructure bill, despite having no final text and former President Trump branding GOP members supporting it as RINOs—Republicans in Name Only. Senate Majority Leader Charles Schumer said he would hold votes on infrastructure and a $3.5 trillion budget bill before the August break. In the House, the Jan. 6 investigation began with testimony by four Capitol and D.C. Metro police. And the Justice Department said that Trump’s tax returns could be shared with a House committee.
Vaccination Push
The federal government told Department of Veterans Affairs workers to get vaccinated. President Biden broadened the order, with a few limitations, to federal workers and the military. New York and California took similar steps. The Centers for Disease Control and Prevention urged even the vaccinated in hard-hit areas to wear masks indoors.
Robinhood Stumbles
Online broker Robinhood’s IPO priced at $38 a share, for a value of $32 billion, near the bottom of expectations. The stock briefly rose, plunged, and then ended up 8.2% off the opening price.
Annals of Deal Making
The merger between Aon and Willis Tower Watson collapsed after a Justice Department lawsuit. The $30 billion deal would have created the world’s largest insurance broker. Aon is paying Willis a billion-dollar breakup fee; Willis announced a billion-dollar share repurchase…Activist investor Cat Rock Capital called for Europe’s biggest food-delivery service, Just Eat Takeaway, to seek a deal to avoid a hostile bid. The reason: the company’s “flawed communications policy” with investors after the merger of Just East and Takeaway last year…Uber said it would buy logistics management firm Transplace for $2.25 billion from TPG…CBRE is buying a 60% stake in alternative-energy and infrastructure firm Turner & Townsend for $1.3 billion.
Write to Daren Fonda at [email protected]
