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ProShares Readies Bitcoin ETF for Launch

ProShares is ready to roll out the first U.S.-listed bitcoin exchange-traded fund.

The Bethesda, Md., firm filed paperwork Friday afternoon paving the way for the launch next week of its Bitcoin Strategy ETF. The fund, which will go by the ticker BITO, and will hold bitcoin futures contracts rather than the cryptocurrency itself, is expected to start trading Tuesday.

The launch follows a 75-day review by the Securities and Exchange Commission. Assuming there are no objections from the regulator, the fund will be considered cleared for trading next week, handing the closely held firm an opportunity the industry has been jockeying over for years.

BITO appears to be the tip of a broader wave of bitcoin futures-based ETFs. Valkyrie Investments, Invesco and VanEck are likely to be cleared to roll out their own funds this month, followed by Galaxy Digital, AdvisorShares, Bitwise, BlockFi and ARK Investment Management in November and December, analysts said.

The funds are a byproduct of asset managers’ eight-year-long effort to launch ETFs that buy bitcoin itself. The SEC hasn’t supported this approach, saying bitcoin trading isn’t transparent enough to shield investors from fraud and manipulation.

In August, SEC Chairman

Gary Gensler

expressed a preference for ETFs that trade bitcoin futures. Unlike digital currencies, futures trade on regulated venues such as the

Chicago Mercantile Exchange.

“This only became a reality because the SEC had given public guidance,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA.

There are still risks with bitcoin futures products, as the SEC noted in a tweet on Thursday, linking to an investor bulletin.

“Before investing in a fund that holds bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits,” the SEC said.

Futures-based ETFs are sometimes hampered by discrepancies between the futures market and the underlying assets they track, and bitcoin is notoriously volatile.

Because of this and other factors, the ETFs might lag behind the performance of bitcoin if it keeps rising. Longer-dated bitcoin futures have tended to trade above short-term contracts, a market dynamic known as contango. This can lead to lower returns for funds as they pay to roll over monthly contracts.

These funds “should give investors returns similar to bitcoin’s spot price, but the actual returns can be different,” said Karan Sood, chief executive of Cboe Vest, which recently launched a bitcoin futures product in the form of a mutual fund.

ProShares, Invesco and VanEck and several other asset managers originally proposed holding other bitcoin-related assets that offer more-direct exposure to the cryptocurrency itself, including some Canadian ETFs and pooled investment trusts.

ProShares revised its strategy to hold only bitcoin futures contracts, according to Friday’s filing. Analysts said the SEC likely wasn’t comfortable with holding other assets, given the issues previously raised by the regulator. The change suggests other firms will likely restrict their funds to trading bitcoin futures only, analysts added.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

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