It's the same reason why you don't buy and own steel, but rather you buy stock in a mining conglomerate or a refinery. Owning a piece of a business in the long-run may be more less volatile than the commodity itself. Though the two can't necessarily be separated in terms of future outlook.
As the fund tracks the price of bitcoin, this isn't a reason that applies in this case. It's not a fund that tracks the value of Coinbase and Bitpay etc, there are barely any public bitcoin companies anyway (maybe 1 or 2 as far as I know, and they're not big players either.)
It's interesting because it interfaces with existing investment infrastructure, culture, protocols etc. Trying to buy, store securely and apply proper accounting rules to a not fully defined (by law) digital currency concept, is not something investment firms want to bother with unless they specialize in bitcoin. (like SecondMarket).
Instead, they'd just want to pull up a vetted fund on an exchange they're familiar with, on their bloomberg terminal they're familiar with, purchase a financial product whose structure they're familiar with, and apply the same accounting standards as they would normally, and deal with the normal legal ramifications of shares of ETFs.
This essentially means anyone can now get exposure to the price of bitcoin without any extra understanding or investment necessary on the technical bits of storage, accounting etc.
And that could be very interesting. Bitcoin makes for a great opportunity. It can go to 0, or it can do 100x or even 500x value growth in the next 20 years. And I'd say the odds of the latter are greater than 10%. That's why it's not such a crazy idea for billion dollar funds to put $10m into bitcoin, as they'd have a chance of making billions at the cost of losing millions. I wouldn't be surprised if, now that it's easy for any pension fund, hedge fund, family fund or university endowment fund to buy in, that we'll see quite a few of them do.
At least, that's always been the story. "If pension funds dedicated only 0.1% to bitcoin, the price would go up one or two orders of magnitude this decade" or something to that effect.
Your comment is very informative but I don't think most of the above applies to this BIT fund, since it's just an over-the-counter listing. It does apply to the upcoming Winklevoss fund, which will be an ETF.
There are many investors who have money that can't easily buy bitcoins for various legal reasons but can buy ETFs. For example 401k or IRA accounts fall into this category.
