Fiending for Futures with This Bitcoin ETF

Now, in a manner with which my readers have grown accustomed, I will not beat around the bush about Bitcoin.

There is thrum of excitement within the markets, and it is related to the potential approval for a U.S.-based spot Bitcoin exchange-traded fund: ProShares Bitcoin Strategy ETF (BITO). While the Securities and Exchange Commission (SEC) has not yet signed off on approval of this ETF, experts have reported the approval may come early in 2024.

Bryan Armour, director of passive strategies research for North America at Morningstar, commented, “For ETF investors, this would be the best product on the market.”

But, why the excitement? Well, on the back of BlackRock’s first steps toward an ether ETF, the price of bitcoin hit an 18-month high, soaring to $37,970. Further, the price of bitcoin has more than doubled since the start of 2023.

With the price of bitcoin raging higher, a spot Bitcoin ETF does sound appealing, as this fund would allow investors to invest directly into the digital asset. Currently, investors have only the option to buy bitcoin futures ETFs.

However, as Benjamin Franklin wrote, “…in this world nothing can be said to be certain, except death and taxes.” And this relates not only to the approval of the spot Bitcoin ETF, but the success of such direct investing for many investors.

This brings us to today’s ETF — ProShares Bitcoin Strategy ETF (BITO). While this is a futures fund, it is a tried and true one. And with such a flurry of excitement surrounding something so new, I want to bring us back to the now.

BITO is the world’s largest and first U.S.-based Bitcoin-linked ETF. And while the fund does not invest directly in Bitcoin, it invests in cash-settled, front-month bitcoin futures, which are traded on commodity exchanges registered with the Commodity Futures Trading Commission (CFTC), such as the CME Futures Exchange.

The value of the bitcoin futures is determined by the CME Group and Crypto Facilities Bitcoin Reference Rate (CME CF BRR), which aggregates bitcoin trading activity across major global bitcoin spot trading venues during a one-hour window.

As a matron of the Bitcoin universe, BITO has closely tracked the performance of the spot bitcoin since its inception. Moreover, this fund can be held through a brokerage account with no need for a cryptocurrency exchange account.

BITO has net assets of $1.09 billion and assets under management of $1.07 billion. Moreover, the fund is trading at the high-end of its 52-week range, which is $19.23, and it is currently trading at $18.33 and climbing. As of the market’s Nov. 15 open, the fund has already climbed 3.27%. Looking at the chart below, it is apparent that BITO is finishing the year strongly, as its price is piggybacking off the aforementioned market excitement.

Chart courtesy of www.Stockcharts.com

Overall, the market may love the idea of investing in the digital currency itself, but Bitcoin has had its shares of ups and downs, and that means more volatility. With BITO, investors are exposed to the crypto world, but with a cushion.

As I mentioned, and as Ben Franklin did before me, certainties are rare in this world and certainly not in the stock market. So, let me leave you with one last thought, from a philosopher of science.

A philosopher who greatly believed that observation and inductive reasoning are an integral part of our scientific understanding — Sir Francis Bacon, who wrote, “If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties.”

I am always happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You may just see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.