First Bitcoin Futures ETF Rises In Trading Debut
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First Bitcoin Futures ETF Rises In Trading Debut

ProShares Bitcoin Strategy ETF advances nearly 5% following its closely watched launch.

By MICHAEL WURSTHORN
Wed, Oct 20, 2021 10:35amGrey Clock 3 min

The first bitcoin-focused exchange-traded fund rose in its trading debut Tuesday after getting a warm reception from investors.

The ProShares Bitcoin Strategy ETF climbed most of the day, gaining nearly 5% to settle at US$41.94. About US$981 million of shares changed hands over the session, making it the second-most highly-traded ETF debut ever, according to Elisabeth Kashner, director of ETF research at FactSet.

The launch is being closely watched on Wall Street, where finding a way to sell securities linked to bitcoin has been a priority for many firms. Bethesda, Md.-based ProShares rang the bell at the New York Stock Exchange on Tuesday to celebrate the launch of its ETF, which goes by the ticker BITO and holds bitcoin futures contracts rather than the cryptocurrency.

“There are a multitude of investors who have brokerage accounts and are comfortable buying stocks and ETFs,” said ProShares Chief Executive Michael Sapir in an interview. “We think this will appeal to them.”

Among the fund’s first-day investors was Thomas Johnson, who is 33 years old and works in pharmaceutical sales in Orlando, Fla. Soon after the fund started trading, Mr. Johnson said he used about 15% of the assets in his retirement account to buy shares of the fund.

“I see cryptocurrencies as a whole as something that will outperform the stock market,” said Mr. Johnson.

He added that it was his first ever purchase of an ETF, although he started buying bitcoin a year earlier.

Other asset managers are expected to launch similar funds, including Valkyrie Investments, VanEck and others. But one of the biggest global asset-management firms, Invesco, on Monday put its bitcoin futures ETF on hold.

“We have determined not to pursue the launch of a Bitcoin futures ETF in the immediate near term,” an Invesco spokeswoman said in a statement. The firm said it is committed to working with its partner, Galaxy Digital Holdings, on an ETF that holds crypto rather than futures.

Invesco didn’t elaborate on the decision.

The firm amended its filing late Monday, pushing the fund’s effective date toward the end of the month rather than withdrawing it altogether, signalling the ETF might still launch later on.

Thomas Lee, a managing partner at research firm Fundstrat Advisors, said the ProShares ETF will enable more individuals to invest in bitcoin. He said assets in the fund could rise to as much as $50 billion from the $20 million the fund started with on Tuesday.

“This will drive higher asset prices via network effects,” Mr. Lee said. He said bitcoin could rise to $168,000 from a recent $64,000.

Bitcoin has climbed 48% since September, reflecting in part purchases driven by the prospective launch of the ProShares ETF and rivals.

The ETF came online following an eight-year effort by asset managers to create funds that hold actual bitcoins. The Securities and Exchange Commission, which hasn’t supported that approach because of concerns that bitcoin trading isn’t transparent enough to protect investors from fraud and manipulation, instead steered asset managers toward the creation of a bitcoin futures product.

Unlike digital currencies, futures trade on regulated venues such as the Chicago Mercantile Exchange.

Futures-based ETFs are sometimes hampered by discrepancies between the futures market and the underlying assets they track.

Asset managers say that is a trade-off some investors are likely willing to make to get exposure to crypto through the more-regulated futures market.

“That’s what I’m counting on. Other investors will see value in the ETF, or at least more of a safety net and be more willing to invest” in crypto, added Mr. Johnson.

Even with the promise of regulatory oversight, SEC Chairman Gary Gensler warned investors Tuesday that bitcoin futures remain just as risky as the cryptocurrency itself.

“It’s still a highly speculative asset class and listeners should understand that underneath this, it still has that same aspect of volatility and speculation,” Mr. Gensler said in a CNBC interview.

 

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: October 19, 2021.



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Why Prices of the World’s Most Expensive Handbags Keep Rising

Designers are charging more for their most recognisable bags to maintain the appearance of exclusivity as the industry balloons

By CAROL RYAN
Tue, Mar 5, 2024 3 min

The price of a basic Hermès Birkin handbag has jumped $1,000. This first-world problem for fashionistas is a sign that luxury brands are playing harder to get with their most sought-after products.

Hermès recently raised the cost of a basic Birkin 25-centimeter handbag in its U.S. stores by 10% to $11,400 before sales tax, according to data from luxury handbag forum PurseBop. Rarer Birkins made with exotic skins such as crocodile have jumped more than 20%. The Paris brand says it only increases prices to offset higher manufacturing costs, but this year’s increase is its largest in at least a decade.

The brand may feel under pressure to defend its reputation as the maker of the world’s most expensive handbags. The “Birkin premium”—the price difference between the Hermès bag and its closest competitor , the Chanel Classic Flap in medium—shrank from 70% in 2019 to 2% last year, according to PurseBop founder Monika Arora. Privately owned Chanel has jacked up the price of its most popular handbag by 75% since before the pandemic.

Eye-watering price increases on luxury brands’ benchmark products are a wider trend. Prada ’s Galleria bag will set shoppers back a cool $4,600—85% more than in 2019, according to the Wayback Machine internet archive. Christian Dior ’s Lady Dior bag and the Louis Vuitton Neverfull are both 45% more expensive, PurseBop data show.

With the U.S. consumer-price index up a fifth since 2019, luxury brands do need to offset higher wage and materials costs. But the inflation-beating increases are also a way to manage the challenge presented by their own success: how to maintain an aura of exclusivity at the same time as strong sales.

Luxury brands have grown enormously in recent years, helped by the Covid-19 lockdowns, when consumers had fewer outlets for spending. LVMH ’s fashion and leather goods division alone has almost doubled in size since 2019, with €42.2 billion in sales last year, equivalent to $45.8 billion at current exchange rates. Gucci, Chanel and Hermès all make more than $10 billion in sales a year. One way to avoid overexposure is to sell fewer items at much higher prices.

Many aspirational shoppers can no longer afford the handbags, but luxury brands can’t risk alienating them altogether. This may explain why labels such as Hermès and Prada have launched makeup lines and Gucci’s owner Kering is pushing deeper into eyewear. These cheaper categories can be a kind of consolation prize. They can also be sold in the tens of millions without saturating the market.

“Cosmetics are invisible—unless you catch someone applying lipstick and see the logo, you can’t tell the brand,” says Luca Solca, luxury analyst at Bernstein.

Most of the luxury industry’s growth in 2024 will come from price increases. Sales are expected to rise by 7% this year, according to Bernstein estimates, even as brands only sell 1% to 2% more stuff.

Limiting volume growth this way only works if a brand is so popular that shoppers won’t balk at climbing prices and defect to another label. Some companies may have pushed prices beyond what consumers think they are worth. Sales of Prada’s handbags rose a meagre 1% in its last quarter and the group’s cheaper sister label Miu Miu is growing faster.

Ramping up prices can invite unflattering comparisons. At more than $2,000, Burberry ’s small Lola bag is around 40% more expensive today than it was a few years ago. Luxury shoppers may decide that tried and tested styles such as Louis Vuitton’s Neverfull bag, which is now a little cheaper than the Burberry bag, are a better buy—especially as Louis Vuitton bags hold their value better in the resale market.

Aggressive price increases can also drive shoppers to secondhand websites. If a barely used Prada Galleria bag in excellent condition can be picked up for $1,500 on luxury resale website The Real Real, it is less appealing to pay three times that amount for the bag brand new.

The strategy won’t help everyone, but for the best luxury brands, stretching the price spectrum can keep the risks of growth in check.

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