The investment manager running the largest bitcoin futures ETF says that the fund is here to stay—despite speculation that the new spot bitcoin rivals pulling in billions of investor money will put them out of business.
The $1.9 billion ProShares Bitcoin Strategy ETF (BITO) was the first bitcoin ETF, approved in 2021 and pulling in $570 million in its first day of trading. That fund, which trades bitcoin futures, now faces an existential challenge from the 11 spot bitcoin ETFs, approved last month, which give investors exposure to day-to-day price fluctuations in the cryptocurrency.
Still, Simeon Hyman, ProShares’ head of investment strategy, says he welcomes the new funds.
“[Based on] what we’ve seen over the past month, we feel really good,” Hyman told etf.com in an interview. “It’s reinforced our view that there are enduring benefits to a futures based approach,” including “a regulated environment with efficient price discovery.”
Trading in BITO surged after the launch of the spot bitcoin products, with daily trading volume reaching a high of 88.6 million shares on Jan. 11, according to Bloomberg data. On Feb. 1, the fund saw 14 million shares trading worth about $298 million, beating the trading volume of the Grayscale Bitcoin Trust (GBTC), the largest spot bitcoin ETF, which traded about $291 million that day, Bloomberg data show.
Yet much of the trading volume appears to be investors selling the fund, as BITO has seen huge outflows—bleeding $143 million in one day on Jan. 31. Since the launch of the spot bitcoin funds, the fund has lost $364 million in outflows, according to etf.com data. At the same time, the largest spot bitcoin fund of the 11 that are now trading, BlackRock Inc.’s iShares Bitcoin Trust (IBIT), has pulled in nearly $3 billion of investor cash.
BITO and the Spot Bitcoin ETFs
Yet with the advent of the spot bitcoin ETF funds, many experts have predicted that the futures funds will progressively see less and less interest from investors, similar to how gold futures ETFs eventually faded out after a gold ETF debuted on the market.
“Though they’ve delivered strong returns over the past year, bitcoin futures ETFs suffer from higher costs than their spot bitcoin ETF counterparts,” said etf.com analyst Sumit Roy. “In particular, roll costs—or the cost of rolling from one futures contract to another—have dampened the ETFs’ returns.”
VanEck, which also offers a spot bitcoin ETF, closed its bitcoin futures fund in late January. Kyle DaCruz, director of digital assets product at VanEck said at the time that company believes investors would “switch from products offering bitcoin futures exposure to direct bitcoin exposure.”
Yet ProShares remains confident that their futures ETF, which is the largest by far, has much to offer investors.
“From a market share perspective, there are absolutely enduring advantages to a futures-based ETF that will allow BITO to coexist and have a nice piece of the market for quite a long time,” Hyman said. “You could count us as certainly modestly bullish with the broader adoption of bitcoin in traditional asset allocations and growing the pie for everybody,” he added.
Contact Lucy Brewster at lucy.brewster@etf.com.