The ProShares Bitcoin Strategy ETF made its public debut on Tuesday, marking a key milestone for the cryptocurrency industry and bitcoin's broader acceptance among investors. The fund had a warm reception among investors, closing 4.8% higher. Some industry observers deem the debut of the ETF – which tracks contracts that speculate on the future price of bitcoin and not the current or "spot" price of the asset – as only a partial victory. However, it's a step forward for positive crypto regulation and could open the door for a spot bitcoin ETF down the road. "I think we will look back on that day in three or five years and remember it as a massive positive turning point for the market: the moment that bitcoin stopped being a retail-led asset and moved into the institutional world," said Matt Hougan, chief investment officer at Bitwise Asset Management, said of the ETF launch day. Bitcoin breached the $64,000 level Tuesday afternoon, a level it hasn't reached in about six months, according to Coin Metrics. It's within shouting distance of its all-time high of $64,899, notched on April 14. It wouldn't be surprising to see a small pullback in the cryptocurrency in the coming days, said Mikkel Morch, executive director at crypto hedge fund ARK36. "A bitcoin ETF approval is likely already priced in at this point," he said. "The hopes for a sustained rally above the $60,000 barrier and further through the previous all-time high may as well turn into 'buy the rumor, sell the news' scenario. The price went from $40,000 to $60,000 in an almost straight line and it would be natural for bitcoin to take a breather after such a long run up." Although, if there is some sell-off, it's unlikely to be as deep or lasting as those that followed previous seminal market moments, like when the CME listed bitcoin futures in December 2017 and when Coinbase was listed on the Nasdaq this April , said Noelle Acheson, head of market insights at Genesis. The market was frothier when those events took place, she said, and the current conditions aren't showing sign of exhaustion. Retail investors' appetite Futures tend to be more of an institutional product, but funds tend to be where retail investors trade. Cboe Volatility Index (VIX) futures, for example, are traded more by institutions, but shares of VIX futures ETFs like those offered by ProShares, are an accessible option for retail investors. "We might expect something similar here where retail investors trade the ETF and then at the end of the day it would still be institutions who are more active in trading the underlying futures," said Juthica Chou, head of over-the-counter options trading at Kraken. "Institutions, especially trading shops, will be hedging their futures trading with spot," she added. "If somebody comes in to buy a future, a trading shop might sell the future and then go and buy bitcoin. The buying demand still makes its way into the spot market." Retail investors' appetite for a bitcoin futures ETF over the long term is uncertain, considering they have other ways to get exposure to crypto. For instance, crypto investing is available on trading platforms such as Robinhood. Investors can also buy the stocks of companies that hold bitcoin on their balance sheets, including MicroStrategy and Coinbase . "[Bitcoin futures ETFs] could be of interest to a limited audience of institutions that can't hold spot or derivatives directly, as well as retail investors that prefer the familiarity and convenience of ETFs," said Genesis' Acheson. "Most investors, however, are more likely to continue to access bitcoin exposure through spot or derivatives, or through any of the many listed securities or international funds that offer spot bitcoin exposure," she added. The long view Federal Reserve Chairman Jerome Powell and Securities and Exchange Commission Chairman Gary Gensler have said they have no plans to ban cryptocurrency . However, the industry is still in a precarious place in Washington , and some fear lawmakers could still overregulate the space . "A futures-based ETF is better than nothing," said Bitwise's Hougan, whose firm has also filed for a bitcoin futures ETF and last week filed for a spot bitcoin ETF. "Pushing the industry to go from zero to one, even if it's not where we ultimately want to go, is a good thing and gives me hope that [the SEC] will give a physical bitcoin ETF a fair review." Industry participants had hoped that Gensler, who the Senate confirmed to lead the SEC in April , would take a more favorable stance on crypto than his predecessor Jay Clayton. So far, that doesn't seem to be the case. "Currently, we just don't have enough investor protection in crypto finance, issuance, trading or lending," Gensler said in prepared remarks before the Senate Banking Committee in September. "We were kind of stuck in limbo land in the Clayton era, and now we're not," Hougan said. "The next bull market is going to be led by regulatory clarity, so there's a risk in Gensler pushing for that regulatory oversight … but if we get a reasonable outcome, it could unleash a bull market in crypto that is unlike what we've seen in the past."
Monitors display Coinbase and Bitcoin signage during the company's initial public offering (IPO) at the Nasdaq MarketSite in New York, U.S., on Wednesday, April 14, 2021.
Michael Nagle | Bloomberg | Getty Images
The ProShares Bitcoin Strategy ETF made its public debut on Tuesday, marking a key milestone for the cryptocurrency industry and bitcoin's broader acceptance among investors.