BITO – The Easiest Way To Play Bitcoin

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When cryptocurrencies first became popular, the only way to invest in them was directly or through stocks that indirectly touched them.

Today, we have multiple ways to invest in Bitcoin through traditional stock accounts.

And it’s not hard to understand why ProShares Bitcoin Strategy ETF (BITO) has gained popularity amongst financial pros and retail investors.

As the number two search in both groups for Bitcoin ETFs, BITO has become the ETF of choice backed by one of the most popular ETF managers in the market.

Even with Bitcoin prices well off their highs, interest in the crypto market remains as strong.

Only 21 million Bitcoins will be produced—ever.

Historically, Bitcoin has experienced several corrections. But with each correction, it has rebounded and gone on to new highs. 

$100 invested on December 30th, 2016, was worth approximately $4,500 on April 18th, 2022. That’s a significantly better return than the S&P 500 and the Nasdaq 100.

However, up until recently, buying Bitcoin was challenging. It required a lot of technical know-how to set up an account and then figure out how to store it in “a wallet.”

Although firms like Coinbase(COIN) made it easier to buy Bitcoin, it’s still a lot more complicated than buying a stock. 

Luckily, investors can now gain exposure to Bitcoin via ETFs. 

And we think Proshares Bitcoin Strategy ETF (BITO) is the best of the bunch.

Proshares Bitcoin Strategy ETF (BITO) is designed to help investors gain exposure to the Bitcoin market. The fund doesn’t directly invest in Bitcoin but does through by buying Bitcoin futures. 

The ETF invests in near-term futures contracts, primarily the front month contract and the proceeding month. 

Because BITO invests in Bitcoin futures and not actual Bitcoin, its results will not be identical to those of Bitcoins. 

Comparing Bitcoin to BITO:

Bitcoin’s recent performance:

BITO’s recent performance

As you can see, BITO has outperformed Bitcoin over the last month. However, it has underperformed Bitcoin over the last 3-months -26.12% vs. -19.86%. 

Year-to-date BITO is down  -50.8%, while Bitcoin is down -49.47%

BITO started trading in October of 2021. If you invested $10,000 on the day BITO started trading, it would be worth approximately $3,700 today. 

Trading BITO

BITO sees plenty of action from traders. It trades about 8.3 million shares daily, offering plenty of liquidity for traders. In addition, options traders can play BITO through weekly and monthly options. This makes it far more popular than other Bitcoin ETFs and trusts.

Investing In BITO

One thing that slips investors’ minds when investing in ETFs is expenses. ETFs charge an expense ratio. Typically you want to avoid ETFs that charge more than 1%. BITO charges an expense ratio of 0.95%. This may sound high, but compared to the Grayscale Bitcoin Trust (GBTC)—it’s not bad. GBTC charges an expense ratio of 2%. Meanwhile, GBTC is down 58%, and BITO is down 50.8%.  

Furthermore, Bitcoin futures have have a strong correlation to Bitcoin.

Which makes BITO an attractive option for investors wanting exposure to Bitcoin. 

Our Opinion 7/10

Like it or not, Bitcoin is here to stay. After all, it was just seven days ago when the largest asset manager in the world, Blackrock, announced it was developing a Bitcoin trust. 

BITO is the first publicly traded Bitcoin ETF trading on a big exchange (GBTC trades on the OTC markets). Because of that, it’s the easiest way for most retail investors to gain exposure to Bitcoin. For most investors, setting up a Coinbase account is too cumbersome. 

Although BITO is not perfect, we like it better than GBTC given the liquidity and lower expenses. Furthermore, we like BITO at these levels, given how much Bitcoin has pulled back. 

We’re buyers at these levels and on any dips.