NEW YORK (Reuters) - Investors are betting market regulators will approve what would be the first U.S. exchange-traded fund to track the price of bitcoin.

FILE PHOTO - A Bitcoin sign is seen in a window in Toronto, May 8, 2014. REUTERS/Mark Blinch/File Photo

From investment funds to wealthy individuals and even a Las Vegas strip club, the bitcoin ETF is generating a lot of buzz for a financial product. The surge in interest in the digital currency is driving upbeat outlooks from several gauges of investor sentiment on the proposed fund. Investors Cameron and Tyler Winklevoss have an application with the U.S. Securities and Exchange Commission for the digital currency ETF, which was filed nearly four years ago. The twins are expected to receive by March 13 the final decision on whether they can list their ETF on the Bats Exchange. “We have spoken to a number of our investors, particularly from the U.S., who have indicated to us that they have been buying bitcoin,” said Daniel Masters, portfolio manager of Global Advisors Bitcoin Investment Fund Plc.

“They think the Winklevoss ETF and other bitcoin ETF listings will succeed.”

If the SEC approves the listing, it would lend legitimacy to an asset that has been the province of enthusiasts and lay speculators. It could pave the way for other ETF listings and unleash the flow of institutional money.

The Legends Room, a Las Vegas strip club where bitcoin is accepted as payment for all services, is hardly institutional money, but it has been following the Winklevoss ETF.

“We are already supporters and expect to be investors as well,” said Legends Room founder Nick Blomgren. “Good opportunities to expand the market for digital currency are rare but they are possible.”

So far this year, bitcoin has surged more than 20 percent, largely due to speculation about the Winklevoss ETF, hitting a record high near $1,300 last Friday BTC=BTSP. On Wednesday, however, it dropped below $1,200.

Spencer Bogart, head of research at Blockchain Capital, said at least $300 million could flow into the fund in the first week of trading if the Bitcoin ETF gets approved.

WHAT ARE THE ODDS?

A contract created by Bitcoin Mercantile Exchange, a cryptocurrency derivatives trading platform, to bet on the SEC’s decision showed a 50 percent probability of approval on Tuesday, said BitMEX’s chief executive, Arthur Hayes, compared to 34 percent late last month.

Another metric gauging investor sentiment on the bitcoin ETF ruling is GBTC, the Bitcoin Investment Trust GBTC.PK backed by Grayscale Investments LLC, which does not trade on public exchanges.

Historically, GBTC has traded at an average of between a 30-40 percent premium to its officially calculated value.

The consensus is that the premium on GBTC shrinks if investors believe the bitcoin ETF will be approved by the SEC because they expect a better product to replace it.

GBTC premiums have dropped since the beginning of the year, Grayscale data showed. By February, the premium shrunk to single digits. Late on Monday, however, the premium has recovered modestly to 16.44 percent.

But strong interest has not convinced investors such as Michael Venuto, chief investment officer at Toroso Investments LLC, which holds bitcoin investments in some client portfolios.

“This could pop the market and I don’t want to be anywhere near it,” Venuto said of the ETF. “If you’re going to buy this, it’s a long-term thing and speculating is a bad idea.”