Michael Saylor, the co-founder of MicroStrategy and a staunch Bitcoin BTC 0.27% supporter, has drawn attention to a significant gap in the year-to-date returns of the ProShares Bitcoin Strategy ETF (BITO) compared to Bitcoin itself.
While Bitcoin has seen an impressive rise of approximately 57% this year, BITO has only risen by 28%. Saylor argues that this discrepancy underscores the need for the approval of spot Bitcoin ETFs.
However, James Seyffart, a ETF analyst, offers a different perspective. He suggests that Saylor’s comparison might be slightly misleading. Seyffart points out that Saylor is comparing Bitcoin’s price with BITO’s price return, without taking into account the total return, which includes dividend value. When this is factored in, the ProShares ETF is only lagging behind by about 6.4% year-to-date.
This discussion brings to light the potential benefits of spot Bitcoin ETFs. If approved, they could lead to a more institutionalized crypto market.
This, in turn, might minimize the gap between returns in futures ETFs and spot ETFs. As the crypto market waits for these developments, all eyes are on major institutional Bitcoin holders like MicroStrategy. It remains to be seen how these institutions will adjust their buying strategies, especially when giants like Blackrock and Fidelity would need to accumulate significant volumes of Bitcoin to operate these ETFs. Such a move would undoubtedly generate substantial demand for the cryptocurrency.
In a related report from CoinDesk, ProShares, the issuer of the first U.S. bitcoin futures-linked ETF, has addressed concerns about the costs associated with the trading of derivatives. They assert that these concerns are unfounded and that their product has closely mirrored Bitcoin’s spot-price performance since its inception. The ProShares Bitcoin Strategy Fund, which trades under the ticker BITO, allows investors to gain exposure to Bitcoin without owning the cryptocurrency directly. It invests in regulated, cash-settled Bitcoin futures listed on the Chicago Mercantile Exchange (CME).
There were initial speculations that BITO and other futures-based ETFs would underperform Bitcoin due to costs associated with rolling over futures contracts. However, Simeon Hyman, a global investment strategist at ProShares, refutes these concerns. He states that BITO has closely tracked Bitcoin’s price since its inception. He further explains that the fund’s interest income from cash holdings compensates for the roll costs, which are closely tied to U.S. interest rates.
With the U.S. Federal Reserve’s recent interest rate hikes, there have been concerns about the impact on futures prices. However, Hyman emphasizes that BITO earns interest on its cash balances, which offsets the roll costs, resulting in close tracking to the price movements of spot Bitcoin.
