ProShares Bitcoin Strategy ETF BITO Underperforms BTC Price by 13.8% This Year: K33 Research

[ad_1]

ProShares’ bitcoin (BTC) futures exchange-traded fund (ETF) has increasingly underperformed BTC this year, diminishing its appeal as a vehicle for betting on BTC price appreciation, according to the report by digital asset research firm K33 Researchs.

The price of ProShares Bitcoin Strategy ETF (BITO) is up 47% year-to-date, lagging BTC’s 60% gain over the same period, K33 Research noted.

The underperformance stems from the costs associated with the structure of the fund. BITO does not buy tokens, but holds BTC futures contracts on the Chicago Mercantile Exchange (CME). The fund has to roll over the contracts every month when they expire, which makes it vulnerable to the price difference between the terms. If the next month’s contract is trading at a premium until the nearest expiration, a phenomenon called contango and typical during a bull market over a sustained period, the fund will compound losses from contango bleeding.

When BITO began trading in October 2021, several observers predicted the fund could underperform the spot market by 10% to 13% annualized, CoinDesk reported at the time.

In its first year, the fund trailed the performance of BTC by only 1.8%, as the bear market in the crypto helped ease the contango bleed.

However, this year’s market rebound has exacerbated funds’ vulnerability to rolling costs, as the CME futures market returned to trading in contango. The performance gap in the first five months of the year has already reached the level that analysts expected for a full year.

Investors should expect this trend to play out, K33 senior analyst Vetle Lunde said in a note. Long-term structure remains an issue for the viability of using BITO as a tool to maintain long exposure, he writes in the report.

The underperformance illustrates the shortcomings of futures-based ETFs relative to spot ETFs, and how the SEC’s stringent stance against direct BTC spot ETFs is hurting investors, Lunde added.

[ad_2]