A few weeks ago Bitcoin Magazine reported that the Bitcoin Investment Trust (BIT) was about to become the first publicly traded Bitcoin fund. On Thursday, the BIT received formal approval for listing on the OTC Markets Group’s OTCQX exchange. The fund is listed with the symbol GBTC, and trading is expected to begin early next week.
Barry Silbert announced on Twitter that the BIT fund is live and waiting for eligible shareholders to deposit their shares and sell.
The BIT is the first product from Silbert’s new Grayscale Investments, a digital-asset management firm being launched concurrently by his Digital Currency Group. The Wall Street Journalnotes that the BIT is the latest addition to the growing number of bitcoin trading platforms that aim to expand bitcoin investments beyond the volatile spot exchanges and attract a new class of investors.
Each share of BIT is worth approximately one-tenth of a bitcoin. Holders of BIT shares won’t hold bitcoin in their names, but they will hold shares of the fund, which itself holds bitcoin. Since the value of BIT shares will fluctuate with the exchange rate of bitcoin, the fund will be a convenient investment vehicle linked to bitcoin – in particular, investors will be able to short the fund and profit from drops in the price of bitcoin. The availability of traded funds linked to bitcoin and investment vehicles such as options, futures and other derivatives is expected to contribute to stabilizing the value of bitcoin.
The BIT skipped the lengthy SEC registration process by taking a shortcut approved by the Financial Industry Regulatory Authority (FINRA). Without SEC registration, the BIT can’t formally be considered as an Exchange Traded Fund (ETF), but other funds are seeking SEC approval for listing on the NYSE or Nasdaq. The Winklevoss twins are planning a Bitcoin Exchange Traded Fund (ETF), the Winklevoss Bitcoin Trust ETF, which will be available to investors on NASDAQ with the ticker COIN.
The BIT will open bitcoin investing up to the wider world of capital markets and traditional investors who prefer not to trade bitcoin as currency because they are scared by bitcoin’s wild price swings.
“Over the past three or four months, a handful of banks have started to experiment,” said Silbert. “Some of them are experimenting around trading, some around using the blockchain for settlement, and some are interested in deploying capital as investors.”
The Grayscale website notes that digital currencies are poised to radically transform our financial system, but it won’t happen overnight.
“At Grayscale, we believe investors deserve an established, trusted, and accountable partner that can help them navigate the gray areas of digital currency investing,” the website says. “That’s why we are building transparent, familiar investment products that facilitate access to this burgeoning asset class, and provide the springboard to invest in the new digital currency-powered ‘internet of money.’”
“The hope within the bitcoin community is that BIT and future publicly traded bitcoin investment vehicles will improve liquidity and thus help smooth out some of the price volatility that has plagued bitcoin in its early years,” notes PandoDaily. “The fact that BIT is also now a regulated entity should help calm the (justified) fears of many prospective bitcoin investors. A more stable bitcoin market is seen as being a necessary pre-condition for widespread adoption as a payment vehicle.”
Image via Grayscale Investments.