Opinions
Crypto Talk with Terence
ProShares Bitcoin Strategy ETF
BITO-N
WAIT
Oct 22, 2021
Stock price when the opinion was issued
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BITO was the first US ETF that tracked Bitcoin. It uses futures contracts of Bitcoin, and this basically means that its tracking is inefficient and will often lag the actual price of bitcoin over time.
On a year-to-date basis, BITO has declined 6%, while the price of bitcoin has increased 44%. A return gap of 50%. But, Bitcoin does not pay dividends, while BITO has a current distribution yield of 36%. This distribution yield has helped to bridge the 50% gap between the actual price of bitcoin and the year-to-date performance of BITO, but not entirely. So while the yield may seem enticing, the fund has lagged the actual performance of what it is tracking, and in the event of a decline in bitcoin, BITO is highly likely to underperform.
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BITO was the first US ETF that tracked Bitcoin. It uses futures contracts of Bitcoin, and this basically means that its tracking is inefficient and will often lag the actual price of bitcoin over time.
On a year-to-date basis, BITO has declined 6%, while the price of bitcoin has increased 44%. A return gap of 50%. But, Bitcoin does not pay dividends, while BITO has a current distribution yield of 36%. This distribution yield has helped to bridge the 50% gap between the actual price of bitcoin and the year-to-date performance of BITO, but not entirely. So while the yield may seem enticing, the fund has lagged the actual performance of what it is tracking, and in the event of a decline in bitcoin, BITO is highly likely to underperform.
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SUCCESSFUL DEBUT FOR THE BITCOIN ETF
Successful debut for the Bitcoin ETF The ProShares Bitcoin Strategy "BITO" made its debut on Tuesday on Wall Street (New York Stock Exchange). This Exchange Traded Fund (ETF) allows investors to acquire shares, which can be bought or sold at any time. At the end of the day, the stock had closed up 4.95% at $41.98. The volume of trades was over $1 billion, placing it second overall, behind the BlackRock US Carbon Transition Readiness ETF, with $1.16 billion.
Note that BITO tracks Bitcoin futures contracts instead of Bitcoin itself. There are two reasons for this. The first being that it was easier to clear the ETF with the SEC as actual bitcoin was not involved in the ETF. The second is the ability to reach a wider target audience as they did not want their customer to go through the hassle of creating Bitcoin wallets.
The arrival of this fund has allowed Bitcoin to break its record in recent days, with a new high reached at $67,000, followed by a sharp correction to $60,000 today.