Celebrating a Year of Leadership in Cryptocurrency ETFs
BITO, the first bitcoin-linked ETF in the United States, has demonstrated its ability to closely track spot bitcoin, despite an extremely volatile period for stocks, bonds, and digital assets during its first year since inception.
After one of the most successful launches in ETF history in October 2021, BITO has continued to perform as designed—and has become the world’s largest and most actively traded cryptocurrency ETF. Meanwhile, hacks of crypto exchanges and lingering questions over whether cryptocurrency brokerage accounts are segregated in the event of bankruptcy, among other issues, have cast a shadow over the spot market's accessibility. That has thrust bitcoin-linked ETFs, like BITO, into the fore as a potential investment vehicle of choice.
Returns Have Been Very Similar to Spot Bitcoin
BITO invests in bitcoin futures and does not invest directly in bitcoin.
Source: ProShares and Bloomberg. Bitcoin returns are measured using Bloomberg Galaxy Bitcoin Index (BTC Index). Standardized performance as of 9/30/22 for BITO: since inception (10/18/21): -70.04% (NAV)/-70.03% (Market Price). The performance quoted, including the tracking of spot bitcoin, represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. For standardized returns and performance data current to the most recent month end, call 866-776-5125 or visit ProShares.com. Index performance does not reflect any management fees, transaction costs, or expenses. Indexes are unmanaged and one cannot invest directly in any index.
Falling Roll Costs Signal A Maturing Market
Many did not predict it would play out this way. A year ago, at the time of BITO’s launch, many skeptics believed that the new ETF would substantially underperform spot bitcoin. Their reason: roll costs, or the cost of continually reinvesting in subsequent futures contracts as they expire, would eat into the returns of a bitcoin-linked ETF.
Instead, it was the behavior of the bitcoin futures market that drove BITO’s close tracking to spot bitcoin. In contrast to a spot bitcoin market that many investors have found more challenging to access, the bitcoin futures market has become more inviting– with strong liquidity and contracts that trade on a regulated exchange. In addition, those roll costs have fallen more than 80% since BITO’s launch in October 2021. Keep in mind, roll costs don’t need to be zero for BITO to closely track spot bitcoin. BITO earns interest on its cash balances that helped to offset the roll costs. While this may be a surprise to the skeptics, roll costs that are roughly offset by interest on cash balances is in fact what foundational principles of finance suggest.1
World's Largest Cryptocurrency ETF
Investors are taking note of BITO’s ability to deliver a return that is nearly spot-on spot bitcoin. Investor demand and flows into the fund have been solid, even during recent declines in the spot price of bitcoin. Today, BITO is the world’s largest cryptocurrency ETF and the most traded digital asset investment vehicle.
An Efficient Crypto Trading Solution
What’s more, BITO is among the top 5% of all US ETFs by average daily dollar volume.2 BITO trades with the tightest spreads of all digital asset investment vehicles3, while other funds that hold spot bitcoin continue to trade at persistent and shifting discounts to their Net Asset Value.
2 Source: Bloomberg. Data since inception, 10/18/21-9/30/22. Past performance does not guarantee future results.
3 Source: Morningstar U.S. Digital Asset Category. Average daily dollar volume since inception, 10/18/21-9/30/22 (Bloomberg). List includes open-end investment companies and grantor trusts. “Digital Assets” funds may invest in digital asset futures, spot cryptocurrencies, equities, or other securities and may be actively or passively managed.