Physical imitations of bitcoin in Istanbul
Bitcoin prices have gained 130 per cent in choppy trading since the start of the year © AFP via Getty Images

Bitcoin has rallied to a record high a day after a bitcoin exchange traded fund launched on Wall Street for the first time, garnering strong demand in a sign of the booming investor interest in the asset class.

The digital coin struck a high of $67,016, surpassing its April peak, following the debut on Tuesday of the ProShares Bitcoin Strategy ETF on the New York Stock Exchange.

“The launch of the Bitcoin futures ETF marked an important milestone for the industry,” said Win Thin, global head of currency strategy at US bank Brown Brothers Harriman. “We see it as an undeniably positive step for the crypto industry, and the market seems to agree.”

The approval of the ProShares ETF, which holds futures tracking the price of bitcoin, opened the floodgates to other filings. Investment manager VanEck applied on Wednesday for a futures-based fund, while Grayscale, the largest digital asset manager with $38bn of bitcoin under management, filed to convert its holdings into an ETF backed by outright holdings of digital tokens.

Markets cheered the launch and subsequent applications because the new vehicles could draw in more investors. Andrea Filtri, co-head of European equity research at Italian investment bank Mediobanca, said that the fund would “allow for a much broader reach [for] the cryptocurrency as ETFs are regulated assets”, adding that financial advisers could now more easily add crypto exposure to client portfolios.

Since the start of the year, bitcoin prices have gained 130 per cent in choppy trading, during which the digital token hit a series of record highs in the first quarter before collapsing to about $28,000 in June. Some of the pullback in the summer was down to fears about more stringent regulation.

Cryptocurrency markets have grown significantly since March last year to reach $2tn in value, partly driven by professional investors jumping into the industry. The decision by the US Securities and Exchange Commission not to block the ProShares fund was also seen as a sign that major global regulators are becoming more comfortable with crypto-backed products, even if they remain cautious on the industry more widely.

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In a sign of the robust demand for crypto products, the ProShares fund traded more than 28m shares on Wednesday, surpassing its opening day volume of 24m, and the price of the ETF rose a further 3.2 per cent.

Traders will also be able to wager on the price of the ProShares bitcoin ETF through derivatives known as options, which allow investors to build significant positions in the fund without holding it outright, the New York Stock Exchange said on Wednesday.

Still, many leading investors remain wary of cryptocurrencies given their intense volatility and the fact that typical valuation models for financial assets often do not* work in digital markets.

“While we see growth opportunities in the technology underlying digital assets, we view direct exposure in crypto coins and tokens as suitable only for highly risk-tolerant and speculative investors,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

*This article has been amended to clarify that traditional financial models typically can not be applied to crypto assets.

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