A year on from its dazzling launch, America’s first Bitcoin Futures ETF has been a near-unqualified success, unless of course you invest in it.
A year on from its dazzling launch, America’s first Bitcoin futures ETF has been a near-unqualified success, unless, of course, you invest in it.
Speaking of performance, its performance is almost perfect. A bunch of worries are over electronic money volatility, the depth of the futures market, and the cost of executing its underlying contracts have all declined in a solid 12-month run for the ProShares Bitcoin Strategy ETF (ticker BITO).
The ETF has received strong demand from loyal investors and in return – as promised – has successfully tracked the largest digital asset.
On the other hand, it’s performance that’s another story.
Fund has dropped more than 70% since launch, following a crypto crash that followed Bitcoin about $20,000. One year old, BITO has announced cumulative capital inflows of more than $1.8 billion, with only $619 million remaining as of Friday.
James Seyffart, one Bloomberg Intelligence analyst. “But if you just want exposure to Bitcoin, BITO is the best option in the ETF scene, at least in the US.”
And investors have flocked in. In the 12 months since launch, only two companies have seen cash outflows, even as digital asset prices drop.
BITO’s inauguration last year was a first that saw the fund achieve the most ranks: its first was the second most traded on record, and it achieved $1.1 billion managed in just two days, a record. For crypto investors, it is memorable as it marks the industry’s big step into the well-established world of traditional finance. With the excitement surrounding the launch, Bitcoin price surged to new highs, hitting near $69,000 a few weeks later.
But, ETFs are not what die-hard fans want. The Fund does not directly hold Bitcoin. Instead, it is based on futures contracts and filed under mutual fund rules that Securities and Exchange Commission Chairman Gary Gensler has said provide “substantial investor protection.” .
WE Regulators have been hesitant to approve a product that tracks real coins, citing volatility and manipulation, among other things.
Fortunately for BITO, concerns about its rollout costs – which involve having to constantly roll forward futures contracts as they expire, and that’s a proven feature for revenue. made a lot of money at the launch of the fund – largely unfounded.
Gregory d’Incelli, co-founder of Scenius Capital Management, said: “One could certainly argue that BITO did indeed work and function as intended while providing investors with a shell SEC-approved wrap with the convenience, liquidity, and transparency of an investable ETF.
Bloomberg Intelligence has estimated that maintaining exposure to the contract before the month will cost investors 10 to 20 percentage points of performance per year, and issuers like Bitwise Asset Management have planned on their own Bitcoin futures ETF against those potentially expensive costs. Instead, BITO has tracked the performance of spot Bitcoin by only about two percentage points over the past year, Bloomberg data shows.
A launch in late 2021 is also out of place as cryptocurrency prices are already precarious. Bitcoin took a hit as the Federal Reserve and other central banks raised interest rates, creating a less favorable environment for riskier assets.
“BITO is one of the most mistimed ETF launches in history, with the launch almost completely coinciding with the price of Bitcoin for delivery,” said Nate Geraci, president of ETF Store, a consulting firm. right. “The flip side of that extremely poor timing is that the Bitcoin futures contract curve flattens out, minimizing the negative impact of monthly rolling contracts.”
But overall, all the pearls in the fund’s suboptimal futures-based structure are still warranted, according to Geraci.
“The bottom line is that BITO is still underperforming – even in a completely brutal crypto winter.” If and when the crypto space turns around, he said, “hopefully the futures curve will slope down and the negative performance gap between BITO and spot Bitcoin will widen.”
“Meanwhile… However. No. Bitcoin. ETFs. ”
