• Bitcoin Futures are now available to retail investors through the ProFunds Mutual Fund

  • ProFunds, a $60 billion asset manager, has filed a mutual fund based on bitcoin futures with the Securities and Exchange Commission in the United States (SEC).

    The Securities and Exchange Commission (SEC) is considering over a dozen bitcoin exchange-traded fund (ETF) applications and has postponed judgments on several of them. The introduction of a bitcoin futures-focused mutual fund expands civilian access to the crypto market marginally, though it will not be as efficient or appealing to investors as an ETF.

    Mutual funds provide individual investors with access to professionally managed portfolios, but they can only be bought or sold once per day, unlike stocks and ETFs, and they cannot be exchanged throughout the day.

    A bitcoin futures mutual fund, on the other hand, is like a musician producing an album on CD instead of using a streaming service, according to Bloomberg Intelligence ETFs analyst Eric Balchunas.

    “We were paying a little less attention to the mutual fund side since the main reward is on the ETF side,” Balchunas admitted. “This item is holding futures in a mutual fund wrapper, so it won’t be tax efficient. What consumers truly want is a physically-backed bitcoin ETF wrapped in a tax-efficient ETF wrapper.”

    According to Balchunas, the move is good for funds that hold bitcoin futures, but it may not signify much for applications that intend to create funds that store genuine bitcoin.

    The Investment Company Act of 1940 (1940 Act) was used to establish this mutual fund, but the bitcoin ETF applications were submitted under the Securities Act of 1933 (1933 Act), which provides fewer investor protections, according to Balchunas. According to Balchunas, funds established under the 1940 Act are supposed to invest in securities, and bitcoin is not one of them. Treasurys can count as securities for a 1940 Act requirement since the mutual fund holds them for margin.

    The Bitcoin Strategy ProFund (BTCFX) intends to invest “all or substantially all” of its assets in CME bitcoin futures contracts. However, the mutual fund may invest assets in Canadian bitcoin ETFs such as Purpose Bitcoin CAD ETF or CI Galaxy Bitcoin ETF during “abnormal market conditions.”

    According to the filing, the fund will not invest more than 10% of its assets in these ETFs.

    The document stated, “The Fund does not take temporary defensive positions.” “During periods when the value of bitcoin is flat or dropping, as well as periods when the value of bitcoin is rising, the Fund will normally hold its bitcoin-related investments. For example, if the value of the Fund’s bitcoin-related investments is dropping, the Fund will normally not withdraw its positions unless redemption requests are received.”

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