Investors who do not want to own bitcoin through a digital wallet or exchange now have a different mechanism to gain access - a traditional mutual fund.
Profunds launched a Bitcoin mutual fund on Wednesday, which offers access to cryptocurrency through futures contracts. It is the first open-ended mutual fund or exchange-traded fund that aims to track the price of Bitcoin in the US, with the minimum investment being just from only $ 1000, and an expense ratio of 1.15% .
The fund plans to invest in futures contracts for the coming months, which are traded on the Chicago Mercantile Exchange. The idea is to roll over the proceeds from each expiring contract to the next month.
The scheme of work is as follows: for example, the spot price of Bitcoin is $ 39,750 and the contract for next month, which expires at the end of August, costs $ 39,850. The fund would buy the contract (at that price) and make a profit if Bitcoin exceeds $ 39,850 at the expiration of the contract. But if the price is lower, the fund will lose money. And after the expiration of each contract, the fund will transfer the proceeds to new ones.
However, one problem is that the Bitcoin spot price may differ from the actual futures of the coming months. But spot price yield simulations have shown almost accurate projections, even though they do not include transaction fees, taxes and other costs.
