ProShares launched mutual funds for Bitcoin (BTCFX) and Ethereum (ETHFX), focusing on futures contracts—different from traditional ETFs that own the actual cryptocurrencies. The mutual funds come with higher fees and less precise tracking of crypto asset performance. Investors should weigh these aspects against the inherent risks of cryptocurrency before diving in.
Cryptocurrency caught the attention of investors recently, particularly after the approval of trading in exchange-traded funds (ETFs) in 2024. Now, with new options available for investing in these digital assets, ProShares has introduced mutual funds specifically for Bitcoin and Ethereum. The Ether ProFund (ETHFX) launched in late February follows the earlier Bitcoin ProFund (BTCFX), which debuted in mid-2021; these are the first mutual funds to track the performance of these cryptocurrencies directly.
So, how do these mutual funds stack up against other crypto ETFs? Well, it’s a bit more complicated than it seems. Unlike spot Bitcoin and Ethereum ETFs that directly hold the respective cryptocurrencies, these ProFunds invest in futures contracts. These contracts are financial derivatives and can lead to returns that differ from those of the cryptocurrencies themselves, sometimes offering more exposure—either up or down.
Now let’s break this down further. When we talk about holdings, the ProFund mutual funds acquire futures contracts—meaning they don’t actually own the coins. In contrast, spot Bitcoin ETFs and spot Ethereum ETFs hold the real assets, which affects everything from costs to returns. For example, current net expense ratios are 1.16 percent for the Bitcoin ProFund and 1.46 percent for Ethereum, though the latter has waived fees until February 2026. Comparatively, top Bitcoin ETFs charge much less, between 0.20 and 0.25 percent, while the best Ethereum ETFs range from 0.19 to 0.25 percent.
Regarding returns, this investment structure creates a crucial distinction. Spot ETFs follow the underlying crypto’s price very closely since they own the actual asset, while the mutual funds could drift further from those prices due to the nature of futures contracts. Subscribers and potential investors should also take into account the availability of these funds; they may not be on every trading platform, although direct purchases from ProShares are possible. ETFs, by nature, are available through stock exchanges, giving them a child’s oversight into buying and selling.
Trading times certainly matter as well. Mutual funds typically get priced and traded after hours, so investors can’t know the exact value they’re getting until post-trade. This contrasts sharply with ETFs, which trade throughout the day—allowing for real-time pricing.
So there’s a lot to chew over regarding differences between mutual funds from ProFunds and the aforementioned spot crypto ETFs. Some of these vary due to the inherent legal differences separating mutual funds from ETFs. However, should investors consider these new crypto mutual funds?
It’s crucial to be aware of a few red flags. For those after a precise return that matches the actual cryptocurrencies, these mutual funds might not hit the mark as many hope. Using futures contracts can significantly distort performance. And let’s not forget the expense ratios, which are on the higher side, making them less appealing compared to cheaper ETFs.
Plus, cryptocurrency as a whole presents unique risks. Prices can swing wildly, leading to potential losses that aren’t tied to traditional business performance. Value is based solely on market sentiment and liquidity. A sudden shift in demand could leave an investment in crypto as valuable as a pile of early dial-up modems.
In conclusion, there are some critical factors to mull over as the Bitcoin and Ethereum mutual funds enter the market.
