ProFunds launched a new mutual fund to allow traders to invest bitcoin without having to purchase the asset. The Bitcoin Strategy is the US’s first mutual fund to invest in futures contracts.
The fund’s goal is to monitor performance of the greatest digital asset in the world before any fees or charges are applied.
Many firms have registered to create exchange-traded funds (ETFs), which invest in Bitcoin and Bitcoin futures. However, no decision has been made by US regulators. The Securities and Exchange Commission delayed a decision in June on whether to approve a Bitcoin ETF for the second consecutive year.
1) Bitcoin futures and bitcoin bitcoin are both new asset classes. The bitcoin market is volatile. The unique risks associated with bitcoin and bitcoin futures include price volatility and lack of liquidity.
2) A Fund investment could result in a rapid and unavoidable loss of significant amounts of money, sometimes even zero. It is possible to lose all your money.
3) The Fund has also made investments in bitcoin futures contracts. The Fund does not directly hold or invest in bitcoin. Futures prices for bitcoin should differ from the current or’spot price. The Fund’s performance may differ from that of the bitcoin spot price.
4) Bitcoin futures markets will be less developed, less liquid and more volatile than established markets. Bitcoin futures have daily limits, collateral requirements, and margin limitations that could prevent the Fund from achieving its goal.
5) Bitcoin is vulnerable to manipulation and fraud because it is not regulated. The actions and comments of media influencers and journalists can cause bitcoin’s price to fluctuate dramatically.
6) The Fund could lose its investment objective for any reason including lack of liquidity or volatility, disruption to bitcoin futures markets, margin requirements, or position limits.
7) ProFunds use sophisticated methods that may not suit all investors. ProFunds are derivative products that can carry some risks.
8) Individual investors have access to professionally managed portfolios through mutual funds, but they are limited in their ability to be purchased or sold only once per day. ETFs and stocks can also not be traded throughout the day.
Certain individuals and companies prefer to buy products that are licensed. Everyday investors are more familiar with the complexities of bitcoin markets than they are with mutual funds.
ProFunds chief executive officer Michael Sapir stated that this is a better option than buying Bitcoin directly, as it may require opening an account with an unregulated party.