ProShares CEO Talks About Bitcoin Funds | News, Sports, Jobs

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In this image pro­vid­ed by ProShares, Michael Sapir, CEO of Proshares, pos­es for a photo.
Cour­tesy of ProShares via AP

By Stan Choe

AP Busi­ness Writer

NEW YORK — Bitcoin’s pub­lic pro­file grew six months ago when the first exchange-trad­ed prod­uct tied to it hit the market.

It took just two days for the fund, the ProShares Bit­coin Strat­e­gy ETF, to amass more than $1 bil­lion. That’s even though the fund, which often goes by its tick­er sym­bol BITO, doesn’t hold bit­coin itself. Instead it invests in futures for bit­coin, a reg­u­lat­ed mar­ket where traders make bets on where the cryp­tocur­ren­cy is head­ing in the com­ing months.

But BITO allowed investors to get involved with bit­coin with­out hav­ing to learn how to hold a cryptocurrency. 

Michael Sapir, CEO of ProShares, spoke recent­ly with The Asso­ci­at­ed Press about the fund’s debut, what kinds of investors it’s serv­ing and about how bit­coin hasn’t lived up to one of its ini­tial pitch­es to investors. The con­ver­sa­tion has been edit­ed for length and clarity. 

Q: What do you per­son­al­ly think of cryp­to? How big a deal will it be, say, 30 years from now? 

A: The truth is no one knows. My view is that in 30 years, cryp­tocur­ren­cies are either going to be a cen­tral part of the finan­cial sys­tem and inte­gral to our day-to-day liv­ing, or cryp­tocur­ren­cies will be a dis­tant mem­o­ry for most peo­ple, and their his­to­ry will be taught at busi­ness schools. 

Q: Do you per­son­al­ly own any crypto?

A: I do not per­son­al­ly. But my 15-year-old son does. With­in the last six months, he has got­ten inter­est­ed in cryp­to invest­ing, along with his friends. 

Frankly, there’s some of the more eso­teric cryp­tocur­ren­cies that he’s taught me a thing or two on. 

Q: Were you expect­ing as big a debut as BITO had?

A: The intro­duc­tion actu­al­ly exceed­ed our expec­ta­tions. By a good amount, espe­cial­ly the first day. We were watch­ing the vol­ume trad­ed, from the minute that we rang the bell at the New York Stock Exchange. 

I was look­ing at the mon­i­tor on the floor of the exchange, and every minute after launch, we would see tens of thou­sands if not hun­dreds of thou­sands of shares being traded. 

Q: Do you have a sense of who those investors are? Are they young or old? Big insti­tu­tions or small-time investors?

A: We don’t have a direct rela­tion­ship with the share­hold­ers, being a secu­ri­ty trad­ed on the New York Stock Exchange. 

But about 16% of Amer­i­cans have at some point bought a cryp­tocur­ren­cy. We think a large part of the oth­er 84% are intim­i­dat­ed by the prospect of try­ing to fig­ure out how to get expo­sure to cryp­tocur­ren­cy and don’t want to open up a spe­cial account to do that and then fig­ure out how to hold a cryptocurrency. 

Ven­tur­ing into the cryp­tocur­ren­cy world can be scary and intim­i­dat­ing. We think a big rea­son for the suc­cess of BITO is it took away a lot of those com­pli­ca­tions and fears. 

Q: So the ones buy­ing your fund are com­plete­ly dif­fer­ent from reg­u­lar cryp­to investors? 

A: Investors in cryp­tocur­ren­cy skew more toward peo­ple who are will­ing to be ear­ly adopters and will­ing to take on risk. 

I think the investors in BITO are prob­a­bly sim­i­lar to those investors, but we think BITO may be cap­tur­ing investors who might be cryp­to hes­i­tant because they can eas­i­ly access bit­coin expo­sure through an exist­ing bro­ker­age account they already have and buy it in the way they’re used to buy­ing stocks and exchange trad­ed funds.

One of the advan­tages we see of BITO is that if you have an IRA, or if you have a 401(k) account that has a bro­ker­age win­dow to it, you have an easy way to get bit­coin expo­sure by buy­ing a fund like BITO.

Q: The pitch for bit­coin used to be that it would pro­tect an investor’s nest egg by not always mov­ing up and down in the same direc­tion as stocks, offer­ing diver­si­fi­ca­tion. But that hasn’t been the case in recent months. Will that scare peo­ple away?

A: I think you’re right in the very recent past. Bit­coin seems to have cor­re­lat­ed with the move­ments of stocks. I don’t know if that’s a per­ma­nent con­di­tion. And there’s been sub­stan­tial peri­ods in the past where bit­coin has per­formed uncor­re­lat­ed with stocks and bonds. 

There seem to be two types of investors in cryp­tocur­ren­cies. The first type are long-term hold­ers who believe that the val­ue of cryp­tocur­ren­cy will go up in val­ue and that hope­ful­ly it will pro­vide a diver­si­fi­er for their port­fo­lio. And the sec­ond type of investor is a short-term investor who isn’t con­cerned about whether it’s cor­re­lat­ed with anoth­er secu­ri­ty or whether it’s diver­si­fy­ing a port­fo­lio. They’re try­ing to take advan­tage of short-term move­ments in the cryp­tocur­ren­cy markets. 

Q: One of the crit­i­cisms of BITO is that it invests in bit­coin futures, not bit­coin itself. Do you feel cus­tomers under­stand the distinction? 

A: In our com­mu­ni­ca­tions, we made clear that BITO invests in bit­coin futures, not direct­ly in spot bit­coin. That said, there’s been about a 0.99 cor­re­la­tion with spot bit­coin in the futures since we launched, and the per­for­mance since we launched has been close to spot bit­coin itself. 

Copy­right 2022 The Asso­ci­at­ed Press.

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