First U.S. Bitcoin mutual fund launched by ProFunds

[fillippone]

Bitcoin Magazine launched this breaking news:

FIRST U.S. BITCOIN MUTUAL FUND LAUNCHED BY $60 BILLION FUND MANAGER

The first publicly available U.S. mutual fund that generally tracks the price of Bitcoin has been launched by a $60 billion fund manager.

Apparently, they took the “easy approach”:

For now, the Bitcoin Strategy ProFund invests in Bitcoin futures contracts, and the fund holds no actual bitcoin, which creates two degrees of separation between investors and the sats they increasingly seek shelter from inflation in.

As many ETF got their application rejected because of settlement/market manipulation risks, ProFund decided to utilise a product already available for professional investors and repackage it to sell to retail investors as the minimum investment is only 1,000 USD.


If it’s not an ETF, it is something really close: the ball is now on Grayscale court.


Link to the product Homepage.

The Bitcoin Strategy ProFund is designed to provide investment results, before
fees and expenses, that generally correspond to the performance of bitcoin.
The fund principally invests in bitcoin futures contracts. The fund does not invest
directly in bitcoin.

Link to the product term sheet.

Link to the full prospectus.

Link to Statement of additional Informations


*UPDATING*

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[The Sceptical Chymist]

Watching, very interesting and about damn time I'd say.

Yeah, but IMO it's still much better to own those sats the article talked about and keep them in your own wallet.  On the other hand, because this is a mutual fund my guess is that it's going to find its way into people's retirement accounts (if they opt for high-risk investments).  That's a good thing for people who want some exposure to bitcoin but, for whatever reason, don't want to go out and buy it and keep it safe. 

What I don't like is this:

ProFund decided to utilise a product already available for professional investor and repackage it to sell to retail investors (minimum investment is only 1,000 USD.

And that's exactly what they're doing: repackaging something and no doubt tacking a fee on top of it, then selling it to people who could probably buy actual bitcoin much cheaper.  Although it's understandable that a mutual fund wouldn't want to buy bitcoin outright (assuming they have an enormous amount of money to play with, which would move the market), I still don't like the idea of a derivative of a derivative being sold to the public, because most of them wouldn't know the difference.

Bitcoin Magazine, eh?  Is that the same one that used to have a print edition a few years ago?

[NeuroticFish]

I still don't like the idea of a derivative of a derivative being sold to the public, because most of them wouldn't know the difference.

For many it's the better approach, just because they would clearly not be able to handle wallet safety and "what's the better exchange" and tx fees and everything.
On the other hand, I also feel that's a shame since some will not get to "taste" the actual Bitcoin...

But yeah, companies repackaging derivatives is ugly and can lead to other problems too 

[Hhampuz]

Sorry to the bitcointalk mod that deemed my post off-topic. Let me elaborate:

Watching, very interesting and about damn time I'd say.

@The Pharmacist, I tend to agree that it may be a shame they don't get the "real" thing but it could also be a good thing IMO. As they get some exposure to crypto while they can tell their friends they've invested in it and as time goes they *hopefully* want to get more involved and eventually do get the real thing either through other sources or on their own.

With a minimum at $1,000 it could get a lot of new people in who aren't technically able enough, yet.

[fillippone]

And that's exactly what they're doing: repackaging something and no doubt tacking a fee on top of it, then selling it to people who could probably buy actual bitcoin much cheaper.  Although it's understandable that a mutual fund wouldn't want to buy bitcoin outright (assuming they have an enormous amount of money to play with, which would move the market), I still don't like the idea of a derivative of a derivative being sold to the public, because most of them wouldn't know the difference.

Bear in mind many investors still cannot buy the real thing (compliance/investment mandate/internal regulation issues).
Those are the exact subjects who are buying GBTC and or MSRT.
Whatever fee are they adding to this fund, my spider-sense tells me it's going to be lower than Graytyscale's 200 bps/year, not to mention the comparison with Microstrategy Share, with a whole added layer of pure madness to the underlying BTC investment.

[Tim-BTC]

As many ETF got their application rejected because of settlement/market manipulation risks, ProFund decided to utilise a product already available for professional investors and repackage it to sell to retail investors as the minimum investment is only 1,000 USD.

This pricing is conducive to more retail investors to buy and gradually learn about Bitcoin.


The price of buying Bitcoin directly seems to be high and it is still operational. In contrast, buying ETFs is too convenient.

[Kong Hey Pakboy]

I totally disagree with them saying it's not an ETF, they said it's something really close. But I do admire the way they packaged it to help it pass through the bureaucratic machine that is the government.

[Lucius]

Obviously, the idea of "invest in Bitcoin without buying real Bitcoin" always falls on fertile ground, which is no exception in this case either. This is just an indicator that there are a lot of people who are interested in such investments, but do not have the necessary knowledge and skills to invest directly in Bitcoin. The question is how good or bad such financial instruments are for those who actually own real coins, because the more those who bet on the price using such ways of investing, the more manipulation there will be on the crypto market. Yet things like this cannot be escaped, it is a logical sequence of things that accompany Bitcoin in its path.

From what I've read about the effects of a real crypto ETF, it will have a positive impact on price - but the long-term consequences could be quite negative. This is not surprising considering that most do not do things like this because they believe in BTC, but believe that they can profit that way.

[JayJuanGee]

Obviously, the idea of "invest in Bitcoin without buying real Bitcoin" always falls on fertile ground, which is no exception in this case either. This is just an indicator that there are a lot of people who are interested in such investments, but do not have the necessary knowledge and skills to invest directly in Bitcoin. The question is how good or bad such financial instruments are for those who actually own real coins, because the more those who bet on the price using such ways of investing, the more manipulation there will be on the crypto market. Yet things like this cannot be escaped, it is a logical sequence of things that accompany Bitcoin in its path.

From what I've read about the effects of a real crypto ETF, it will have a positive impact on price - but the long-term consequences could be quite negative. This is not surprising considering that most do not do things like this because they believe in BTC, but believe that they can profit that way.

We still have to see how bitcoin is going to play out in terms of some of the various financial instruments.  Many of us already appreciate that one of bitcoin's killer features of being able to demand its possession right away can be a very powerful tool to use and also to keep third parties in-check - even though people are also used to contracting away their ability (rights) to demand immediate possession, so it could take 20 years to 50 years for the power of bitcoin to be harnessed in terms of the demanding immediate possession power and whether people actually use such power before bitcoin is driven into the ground by various factional reserve practices that are used through a variety of financial instruments - whether people appreciate that fractional reserve practices are happening or not...

For example, if someone can bet 10k bitcoins, and own no fucking bitcoin (because they put up some other collateral such as dollars or something else) that is fractional reserves whether we recognize and appreciate that dynamic or not, it already exists through various kinds of financial instruments that are tied to bitcoin - and contracts might allow it and for sure the "law" is not sympathetic to bitcoin being able to maintain it pristine supply scarcity (they give no shits, and may well want to dilute the fuck out of bitcoin as much as they can).

[avikz]

For now, the Bitcoin Strategy ProFund invests in Bitcoin futures contracts, and the fund holds no actual bitcoin, which creates two degrees of separation between investors and the sats they increasingly seek shelter from inflation in.

Lol! For the same reason it literally makes no sense to me! The only benefit bitcoin can have from this mutual fund, is free promotion! So some ignorant investors who might have not heard the name of bitcoin, will come to know the name and possibly will discover its potential. Apart from this, no beneift will be received by the crypto market. But some pro fund managers will continue to shift other's money into their own pocket using the name Bitcoin! Sometimes I wonder how stupid a peraon can be to invest in such bitcoin funds and not invest directly in bitcoin!

[JayJuanGee]

For now, the Bitcoin Strategy ProFund invests in Bitcoin futures contracts, and the fund holds no actual bitcoin, which creates two degrees of separation between investors and the sats they increasingly seek shelter from inflation in.

Lol! For the same reason it literally makes no sense to me! The only benefit bitcoin can have from this mutual fund, is free promotion! So some ignorant investors who might have not heard the name of bitcoin, will come to know the name and possibly will discover its potential. Apart from this, no beneift will be received by the crypto market. But some pro fund managers will continue to shift other's money into their own pocket using the name Bitcoin! Sometimes I wonder how stupid a peraon can be to invest in such bitcoin funds and not invest directly in bitcoin!

Are you detached from reality, avikz (nothing personal intended)?

I am not going to disagree with your overall premise that there is a lot of value in investing directly into bitcoin, but there are a whole hell of a lot of folks who invest through fund managers whether we are considering status quo rich individuals and/or institutions, and some institutions are not even able to buy and hold directly (absent the development of some better wide-spread custodial solutions that within acceptable limits of their investment guidelines).

Sure, there are potential dangers towards bitcoin's overall value proposition of direct ownership, but it seems quite pie in the sky to look at the world without considering the reality of various status quo financial institutions and practices and consider that all of those institutions and practices will just get abandoned because of bitcoin.  It likely will take 30 years or longer for various kinds of institutions and practices to completely evolve, and we can hardly even speculate that we know how these matters are going to play out with a lot of specificity - and bitcoin is already designed in ways to prepare to fit into these systems and to cause gravitational pull of the value out of those various less sound practices into bitcoin, so sure there could be gradually and then suddenly, yet I doubt that we just get to the suddenly part without experiencing some gradually first.

Another thing.. there are all kinds of scenarios in which normies in their 20s and 30s might be just attempting to get started in their investment life and perhaps buy a house, but then they also might have a 401k at work, and the 401k restricts what they are able to invest into, and they end up barely having enough cashflow to invest in minimum ways and bitcoin might ONLY end up coming on their radar as a possible additional investing option because it becomes one of the options in their 401k.  

I am not even saying what may or may not be better for bitcoin but instead trying to deal with reality, and probably in the end, everything is good for bitcoin even if it might take 30 to 50 years or even more to iron out quite a bit of the value gravitation into bitcoin and even for more concrete and widespread recognition of the various ways to gain exposure to bitcoin and some of those ways are preferable from an individual level, but they might be different from an institutional level - at least during transition into more and more bitcoin dominance phases.. which also seems inevitable even if it could take 30 to 50 years to witness some of these matters to play out in concrete ways from our current world-wide BTC adoption levels that are likely below 1% of the world's population to higher levels that even approach 50% or more of the population having significant stakes in bitcoin... perhaps? perhaps?

[el kaka22]

I still think that this is ETF but at the same time I still do not understand why normal ETF doesn't get accepted at all? Yeah there is risks involved but this is the same place that accepted the mortgages to be combined together in thousands so that people could make more money together.

Think about it, it wasn't enough for banks to make money from the mortgages, they were already making a very good hefty profit from those anyway, but they also ended up making a ton of profit from combining them together and selling them once again. That is the type of craziness that happened in the market before and it caused soooo much debt and crash that even Spain and Italy and Greece nearly all went bankrupt because of it, can you imagine the greed of wall street? Same place says crypto is too volatile and risky to have an ETF? That is just bullshit if you ask me.

[fillippone]

ProFunds has been launched.
I added it to my Bitcoin Treasuries spreadsheet.

Here is the history so far:

[fillippone]

Oops, I think I made an error: I multiplied by three orders of magnitude the NAV.

 Here is the correct, and updated, graph:



Looked too good to be true!
I was misled by the first NAV of 25 USD, I thought it was 25,000 as the minimum investment is 1,000.

[XUNing]

As the first publicly issued U.S. mutual fund that usually tracks the price of bitcoin, it provides investors with a way to obtain bitcoin strategies through mutual fund investment. The new mutual fund provides investors with exposure to the price of Bitcoin, which is conducive to more retail investors to buy and gradually understand Bitcoin, which will have a positive impact on the price.

[fillippone]

Finally, Profunds surpassed 10 Millions dollars of AUM:



What I noticed is some kind of "trading" activity on this fund, with even some net outflows from the funds in the last few days.
I don't know if a pension fund can be seen as a "trading object", but this fact puzzles me quite a little bit.

[fiulpro]

Watching, very interesting and about damn time I'd say.

Yeah, but IMO it's still much better to own those sats the article talked about and keep them in your own wallet.  On the other hand, because this is a mutual fund my guess is that it's going to find its way into people's retirement accounts (if they opt for high-risk investments).  That's a good thing for people who want some exposure to bitcoin but, for whatever reason, don't want to go out and buy it and keep it safe. 

What I don't like is this:

ProFund decided to utilise a product already available for professional investor and repackage it to sell to retail investors (minimum investment is only 1,000 USD.

And that's exactly what they're doing: repackaging something and no doubt tacking a fee on top of it, then selling it to people who could probably buy actual bitcoin much cheaper.  Although it's understandable that a mutual fund wouldn't want to buy bitcoin outright (assuming they have an enormous amount of money to play with, which would move the market), I still don't like the idea of a derivative of a derivative being sold to the public, because most of them wouldn't know the difference.

Bitcoin Magazine, eh?  Is that the same one that used to have a print edition a few years ago?

When the companies decide to repackage something that is not needed, which can very easily be used by itself, I do think that it's High time that the people realize that they are very much capable of doing all this, investing in Bitcoins is as easy as buying stuff online and at the same time, their privacy is more often compromised!

Finally, Profunds surpassed 10 Millions dollars of AUM:



What I noticed is some kind of "trading" activity on this fund, with even some net outflows from the funds in the last few days.
I don't know if a pension fund can be seen as a "trading object", but this fact puzzles me quite a little bit.

Trading is something that is never 100% positive, plus doing it with the pension funds!! Really?? I do not know why they would even do something like that since this is more like keeping all these funds on the stake and loosing them maybe instantly, it's not sure, but that might happen.

Pension fund= stability and what they are trying to do here is not really ideal.

[oHnK]

If you look at this news it is said that this is the first mutual fund whose proportion is BTC.  For me, this is a new form of literacy for the public, especially for those who invest in mutual funds.  Each market has its own users, such as shares previously owned by Greyscale and other companies.  If the current proportion of mutual funds has shifted to a new trend, namely BTC, then this is a new level of mutual fund risk.  As I read in the book it said that equity funds were the riskiest but now that has changed.  When mutual funds purchased by consumers have a high value, I believe they will be more interested in investing and trading in the spot market than intermediaries.

[fillippone]

In the meantime, AUM is north of 13 MIOS USD, with a NAV that retracted correspondingly to the BTC spot price.
Actually, shares are hitting an ATH every day, as you can see from the spreadsheet:




Retail mutual funds traders didn't think twice about BTFD!