BITO ETF

Bitcoin's current bull run is driven by momentum, making it a high beta investment, but traditional valuation methods are challenging. BITO ETF tracks bitcoin via CME futures, but its structure leads to high dividends and lagging performance compared to spot bitcoin ETFs like IBIT. BITO's high monthly dividend impacts price performance, making it better suited for short-term options rather than long-term LEAPs.

Consensus thinking is that a Trump win would be positive for gold, Bitcoin, the dollar, and financial stocks, but negative for Treasury bonds and oil prices. USO lost about 5% of its value in the last month, while BITO gained more than 7%.

Tesla (TSLA) reports earnings after the closing bell, and @Theotrade's Don Kaufman joins Rick Ducat and Caroline Woods to break down the technical trends. They also dive into home furnishing and crypto by examining RH (RH) and the ProShares Bitcoin ETF (BITO).

BITO offers exposure to Bitcoin through futures contracts, providing ease of access and significant monthly distributions despite tracking errors and high volatility. BITO is down significantly since my last article, but I remain bullish, albeit for different reasons. Technical indicators suggest a potential end to BITO's downtrend, with bullish seasonality from October to February historically supporting Bitcoin price increases.

We think BITO is inferior to other spot-based BTC products due to the fund's high expense ratio and futures-based approach to getting crypto exposure. High transaction costs, liquidity constraints, and a uniquely inefficient 'rolling' mechanic should cause structural underperformance vs. the underlying going forward. Despite some niche use cases, BITO's structure results in substantial performance drag making it a sub-optimal long-term investment.

I have a hold rating on the ProShares Bitcoin Strategy ETF due to mixed macro risks and bearish seasonality in the near term. The Fed's anticipated rate cuts could benefit Bitcoin, but a stronger US dollar and historical seasonal weakness in August and September pose risks. BITO offers exposure to Bitcoin futures, not directly to Bitcoin, and has returned 35.3% year-to-date compared to spot Bitcoin's 43.3% gain.

The price of Bitcoin seems to be going up, making investors feel that they may be missing an opportunity to invest, especially with BITO which pays a substantial amount of dividends. However, the price action shows that BTC's price seems more range-bound while miners, which are a key component of the ecosystem, continue to consolidate in the post-halving landscape. Also, more than six months after the emergence of several spot ETFs, BITO seems to be standing its ground when looking at total returns.

BITO has delivered positive returns since I last covered it, but it has faced significant losses in recent weeks, as Bitcoin appears to enter a bear market. Assuming Bitcoin lacks fundamental use value as a fiat alternative, its returns appear driven by excess liquidity in the financial market. COVID-era stimulus created immense excess financial market liquidity, most of which has dried up, causing speculative assets like Bitcoin to stagnate.

On Friday, ProShares rolled out two ETFs offering 2x leveraged and 2x inverse exposure to the performance of ether, respectively. The ProShares Ultra Ether ETF (NYSE Arca: ETHT) and ProShares UltraShort Ether ETF (ETHD).