ProShares, the issuer of the first U.S. bitcoin futures-linked exchange-traded fund (ETF), reassures investors that concerns about tracking errors are unfounded. The ProShares Bitcoin Strategy Fund (BITO) has closely mimicked bitcoin’s spot-price performance since its launch in October 2021. The ETF invests in regulated and cash-settled bitcoin futures listed on the Chicago Mercantile Exchange (CME).
Key Points:
- Observers initially speculated that the ETF would underperform bitcoin due to costs associated with rolling over futures contracts.
- The contango, which is the premium on longer-dated futures contracts, can lead to higher costs.
- BITO has returned -54.5% compared to -51.5% for bitcoin, with the difference mostly attributed to the fund’s fee.
- The ETF’s interest income from cash holdings offsets roll costs, resulting in close tracking to the price movements of spot bitcoin.
- ProShares has paid dividends six times this year to cover the roll decay in the fund.
Spot-Based ETFs and Institutional Money
Despite calls for spot-based ETFs that directly invest in bitcoin, ProShares believes its futures-based strategy remains effective. The ETF has attracted $1.1 billion in assets under management and continues to see inflows. The potential launch of spot-based ETFs is expected to unlock institutional investment in the crypto market.
Hot Take
The success of the ProShares Bitcoin ETF in tracking bitcoin’s performance shows that futures-based strategies can be a viable option for investors seeking exposure to cryptocurrencies. While concerns about costs and tracking errors were initially raised, the ETF has proven its ability to closely mimic bitcoin’s spot-price movements. This demonstrates the potential for innovative financial products to provide avenues for crypto investment.
Cora Skindell is a standout figure in the world of cryptocurrency analysis, research, and editorial expertise. As a seasoned crypto analyst and researcher, Cora’s insights delve deep into the complexities of digital assets, resonating with a diverse audience. Her ability to dissect intricate crypto concepts is complemented by her adept editorial skills, enabling her to distill complex information into easily understandable content.