ProFund Makes Crypto Investing Easier With Its New Bitcoin Mutual Fund
In a first of its kind move, ProFunds, a Maryland-based firm, launched a new Bitcoin mutual fund. The fund facilitates users to invest in Bitcoin without going through the strenuous process of opening a digital wallet.
The newly launched Bitcoin Strategy ProFund (BTCFX) offers exposure to BTC via futures contracts. The fund tracks the performance of Bitcoin while offering investors “a convenient way to incorporate this digital asset into their portfolios,”. This new strategy gives clients an edge to invest in BTC through a familiar channel.
In a release by ProFunds Chief Executive Officer Michael Sapir stated, "Cryptocurrency has become a significant asset class, and our new Bitcoin Strategy ProFund provides investors access to a bitcoin strategy through a mutual fund investment."
Adding to it, he said, "Compared to directly buying Bitcoin, which may involve opening a new account with an unregulated party. This ProFund offers investors the opportunity to gain exposure to Bitcoin through a form and investment method that tens of millions of investors are familiar with."
PrFund’s bitcoin mutual fund significantly reduces the entry barrier for investors with a minimum investment of only $1000. However, the expense ratio to manage the funds is 1.15 percent, which is slightly higher than the typical 1 percent charged in the ETFs.
The fund intends to invest in front-month futures contracts that trade on the Chicago Mercantile Exchange (CME). The notion is to roll over the proceeds from each expiring contract into fresh ones for the coming month. It does not invest in Bitcoin directly but can invest in pooled investments that have exposure to Bitcoin.
Speaking on this, Simeon Hyman, head of the investment strategy at ProShares, said, "The performance of the Fund should be expected to perform differently from the spot price of Bitcoin, these differences could be significant."
Considering the volatility of Bitcoin trading, the fund could gain or lose money on a futures contract within a fleeting window in a few hours or minutes.
The cryptocurrency's price has fluctuated with almost no certainty over the past year. Considering its historical volatility, BTC prices can and often do shift more than 10 percent within a day. The SEC has cautioned investors that they should be aware of the risks of investing in mutual funds that hold Bitcoin futures.
The approval of the Bitcoin Strategy fund could promote similar products in the same domain and develop the whole ecosystem, which includes ETFs. This is more likely to open up new opportunities for financial advisors to offer clients some exposure to Bitcoin.