Bitcoin hits new high as launch of new fund opens up market to wider class of investors

Bitcoin has hit a new record high after the launch of a new exchange traded fund (ETF) linked to the cryptocurrency – seen as likely to open it up to a wider class of investors.

The price topped $67,000 on Wednesday, surpassing a previous record of just below $65,000 set in April.

Bitcoin – the world’s leading cryptocurrency – had sunk to less than $30,000 over the summer as worries about regulation in China took hold.

Figures published at the start of this year showed 2.3 million UK adults held cryptoassets including Bitcoin, up by 400,000 on the previous year, despite warnings of the risks involved.

The Financial Conduct Authority (FCA) has said that if consumers invest in the unregulated products they should be prepared to lose all their money.

But Bitcoin is making gains now on the launch of the first US ETF linked to it.

Such a fund tracks an asset, sector or commodity but can be bought or sold by investors on the stock exchange.

Tuesday was the first day of trading for the ProShares BitCoin Strategy ETF – and saw its shares rise by 2.6% before ascending further on Wednesday.

The ETF does not invest directly in Bitcoin but instead in the futures market linked to the cryptocurrency.

But the development is seen as bringing a new class of investors – with those with a traditional brokerage account able to buy or sell the ETF.

ProShares chief executive Michael Sapir said in a statement earlier this week: “We believe a multitude of investors have been eagerly awaiting the launch of a bitcoin-linked ETF after years of efforts to launch one.”

He said the ETF “will open up exposure to bitcoin to a large segment of investors who have a brokerage account”.

These could be investors who “are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider and creating a bitcoin wallet or are concerned that these providers may be unregulated and subject to security risks”, Mr Sapir said.

Bitcoin has attractions for those who hold a portfolio of investments as it moves independently of other assets such as stocks or bonds.

Its role has sometimes been compared to that of gold, seen as a store of value at times of volatility elsewhere – though the cryptocurrency has a much shorter track record.

Others see digital currencies independent of governments as the future of finance though they are still not widely used as a form of payment.

The energy-intensive “mining” process in which computers generate Bitcoins has drawn sharp criticism because of its environmental impact.

Regulation also poses a threat, with China last month declaring Bitcoin transactions illegal.

In the US, the chair of the Securities and Exchange Commission has said cryptocurrencies do not have enough protections for investors.

James Quinn, managing partner at Hong Kong-based cryptocurrency private wealth manager Q9 Capital, said the
launch of the new ETF was “meaningful” for Bitcoin as it could be “available to a lot of folks”.