ProFunds, an asset manager that manages $60 billion worldwide, has registered a mutual fund based on bitcoin futures with the U.S. Securities and Exchange Commission (SEC). 

The SEC is reviewing more than a dozen bitcoin exchange-traded fund (ETF) applications and has delayed decisions on several of them. The launch of a bitcoin futures-focused mutual fund slightly increases retail access to the crypto market for retail investors, though it won't be as efficient or attractive for investors as an ETF might be.

Mutual funds give retail investors access to professionally managed portfolios, but they can only be bought or sold once daily and cannot be traded throughout the day as stocks and ETFs can. 

To the crypto industry, however, a bitcoin futures mutual fund is like a music artist releasing an album on CD instead of a music streaming service, said Bloomberg Intelligence ETFs analyst Eric Balchunas.

“Admittedly, we were paying a little less attention to the mutual fund side because the ETF side is where the real prize is,” Balchunas said. “This thing is holding futures in a mutual fund wrapper, and it's likely not going to be tax efficient. What people really desire is a physically backed bitcoin ETF, in an ETF wrapper that is tax efficient.”

The move is positive for funds that hold bitcoin futures, but may not mean anything for applications that aim to create funds that hold physical bitcoin, Balchunas said. 

This mutual fund was filed under The Investment Company Act of 1940 (1940 Act) whereas the bitcoin ETF applications are being filed under Securities Act of 1933 (1933 Act) which has less investor protections, Balchunas added. 1940 Act funds are required to invest in securities, and bitcoin isn’t a security, Balchunas said. Because the mutual fund holds Treasurys for margin, those can count as securities for a 1940 Act requirement. 

Bitcoin Strategy ProFund (BTCFX) aims to “invest all or substantially all” of its assets into CME bitcoin futures contracts. During “unusual market conditions,” however, the mutual fund may invest assets into Canadian bitcoin ETFs, such as Purpose Bitcoin CAD ETF or CI Galaxy Bitcoin ETF. 

The filing noted that the fund won't invest any more than 10% of its assets into these ETFs. 

“The Fund does not take temporary defensive positions,” the filing said. “The Fund will generally hold its bitcoin-related investments during periods in which the value of bitcoin is flat or declining as well as during periods in which the value of bitcoin is rising. For example, if the Fund’s bitcoin-related investments are declining in value, the Fund generally will not exit its positions except as needed to meet redemption requests.”