The world's first Bitcoin-related mutual fund is launched

U.S. asset manager ProFunds on Wednesday launched a new investment product, the Bitcoin Strategy ProFund (BTCFX), which it claims is the first public mutual fund tied to the value of the largest cryptocurrency.

ProFunds said the fund does not invest directly in bitcoin, but only in bitcoin derivatives (futures contracts) that track the price of the digital currency. This is the latest financial product to provide exposure to bitcoin, and companies are calling on clients to invest and get a piece of the action.

More than a dozen investment firms have applied to launch exchange-traded funds (ETFs) that invest in Bitcoin or Bitcoin futures, but so far no decision has been made by U.S. regulators. In June, the U.S. Securities and Exchange Commission was cautious about whether to approve a Bitcoin ETF for the second time in 2021.

Bitcoin continues to rebound and is set to hit its longest winning streak this year, rising for the past eight consecutive days, the longest winning streak since December last year. Other cryptocurrencies, including second-ranked Ethereum, are also climbing.

Cryptocurrency prices have seen wild swings over the past year, and the U.S. Securities and Exchange Commission has warned investors that they should be aware of the risks of investing in mutual funds that hold bitcoin futures.

Companies like Robinhood and Cash App have made it easier to buy Bitcoin and other cryptocurrencies by creating ways for people to put money into Bitcoin through digital wallets or by storing important passwords.

Still, some investors want to buy regulated products, and average investors are often more familiar with mutual funds than the complex cryptocurrency market.

The total expense ratio for the bitcoin derivative launched by ProFunds is 1.15%, slightly higher than the 1% or lower expense ratios found in ETFs.

Michael Sapir, CEO of ProFunds, stressed that this new Bitcoin derivative represents a combination of a familiar investment tool and a new financial asset class. He said:

“Cryptocurrency has become a significant asset class, and our new product provides investors with access to Bitcoin through mutual fund investments. ProFunds offers investors the opportunity to gain exposure to Bitcoin through an investment method they are familiar with, as opposed to opening a new account and purchasing Bitcoin directly in the unregulated cryptocurrency market.”