Exchange Traded Funds (ETFs)

ETF Talk: The Future (of Bitcoin) Is Still Bright

While much of the rest of the market is eagerly anticipating the Federal Reserve’s signaled rate cuts, one sector is more hesitant than most.

Certain analysts are predicting that Bitcoin prices may fall as much as 20% in response to the rate cuts. Coupled with September being a traditionally rough month for the cryptocurrency, the future of Bitcoin may look rocky to its skeptics.

However, I believe this view of Bitcoin’s future is ultimately shortsighted. Cryptocurrency is still going strong, and this dip should be treated less as a fall from grace, and more as an opportunity for a great investment.

The real question is: how should we best invest in Bitcoin’s future? I think the answer lies in Bitcoin futures — more specifically, the ProShares Bitcoin Strategy ETF (BITO).

Issued in 2021 by ProShares Advisors LLC, BITO provides exposure to Bitcoin returns in the form of an ETF. Instead of directly investing in Bitcoin, the fund manages a portfolio of cash settled, front-month Bitcoin futures.

The value of these futures is determined by the CME Group and Crypto Facilities Bitcoin Reference Rate. Their value is found by aggregating Bitcoin trading activity across major global Bitcoin spot trading venues during a one-hour window and dividing those windows into 12 five-minute segments. Each segment has a volume-weighted median (VWM), and the value is expressed as the mean of those 12 VWMs.

BITO’s Bitcoin futures are held through two relatively equally represented means: The U.S. Dollar (50.94%) and United States Treasury Bills (49.06%). The fund has a current expense ratio of 0.95% and has $1.74 billion in assets under management.

Exclusive ETF Talk: Finding Value in Your Brokerage

Chart Courtesy of www.stockcharts.com

As of Sept. 2, the fund is down 6.63% in the past month and 15.02% in the past three months. However, the fund is also up 31.33% year to date and an astonishing 109.83% in the past year. This shows the true long-term viability of the crypto market despite temporary setbacks.

While the future of Bitcoin continues to shine, it may not be right for your own financial future. You should always consider your investment goals and do your due diligence before adding any stock or exchange-traded fund (ETF) to your portfolio

As always, I’m happy to answer any of your questions about ETFs, so do not hesitate to email me. You may 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 Forecasts & Strategies, Tactical Trader, TNT Trader, Five Star Trader, Bullseye Stock Trader, and The Deep Woods. 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.