Despite a challenging year, the Bitcoin Futures ETF is still standing

In sports, a stat-busting rookie year isn’t always a harbinger of future success. Some stars begin their big careers by traveling a rocky road at first on their way to success, which can mean a similar fate for ProShares Bitcoin Strategy ETF (BITO).

The fund’s introduction was one of many firsts – the most impactful being the first exchange-traded fund (ETF) linked to Bitcoin. It gave the US stock market a taste of what could be possible if a cryptocurrency-linked fund hit the traditional financial market.

Essentially, it blended the emerging world of digital assets with traditional finance. Whether this was embraced or not, it signaled a shift in accepting cryptocurrencies as a legitimate investment that should be taken more seriously.

Of course, the introduction of the fund a year ago was at the height of a cryptocurrency bull market. Bitcoin looked like it was going to rocket past the $70,000 mark before falling back to earth or, given the way it has fallen this year, the earth’s core.

Bitcoin, the leading crypto based on market cap, has fallen around 60% for the year, which is met with varying views on the future of cryptocurrencies in general. Detractors may see it as the beginning of the end, while pundits see a convenient buying trigger to pick up Bitcoin on the cheap.

Either way, BITO offers access to investors who are considering Bitcoin exposure but are not yet ready to dive head first into the Wild West crypto markets. Ultimately, this has been a win for BITO despite what the crypto market has been doing for most of the year.

“One can certainly argue that BITO has indeed functioned and performed as intended, while offering investors an SEC-approved wrapper with the convenience, liquidity and transparency of an investable ETF,” said Gregory d’Incelli, co-founder of Scenius Capital Management, in a Bloomberg article.

Any potential investors who worry about whether a Bitcoin futures ETF can mimic the cryptocurrency’s price need only look at the side-by-side year-to-date chart of both assets. With a simple eye test, Bitcoin’s price and BITO appear to have a one-to-one correlation.

To silence the critics

One of the shocks against BITO is the expectation that the inclusion of roll costs for futures will cause the fund to perform worse than the cryptocurrency. However, that has not been the case, given its spot-on correlation with Bitcoin’s price.

“Instead, it was the behavior of the bitcoin futures market that drove BITO’s close tracking to discover bitcoin,” ProShares noted. “Unlike 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 traded on a regulated exchange.”

Meanwhile, the fund remains in a class of its own in the US financial market, having survived the major roadblock of most cryptocurrency-based funds: the Securities and Exchange Commission (SEC). Spot Bitcoin ETF products have tried to penetrate the market, but to no avail – at least, it seems, in 2022.

For now, BITO provides the gateway for investors who want crypto exposure to diversify their assets, but still within the safe confines of a regulated market. As the crypto market grows and the government looks to strengthen its regulatory structure, BITO can provide investors with the regulated crypto exposure they want.

In addition, the fund is actively managed, giving investors peace of mind knowing that their investment is in the hands of experienced portfolio managers. Bitcoin can be a volatile asset, and active management can make portfolio changes on the fly when market conditions warrant an adjustment.

For more news, information and strategy, visit Crypto channel.