Proshares Bitcoin Strategy ETF

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Contributor, Benzinga
November 24, 2021
Last update: 8:00PM (Delayed 15-Minutes)
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Vol / Avg.5.931M / 10.779MMkt Cap-
Day Range18.710 - 18.92052 Wk Range10.155 - 19.478

It’s finally happened. After years of back and forth between fund issuers and regulators, an agreement was finally reached and Proshares was able to launch its Bitcoin Strategy ETF under the ticker symbol BITO. While it’s not technically the first Bitcoin ETF, BITO is a watershed moment for cryptocurrency as a true Bitcoin futures product now trades on major US exchanges.

How was the ETF greeted by the markets? Like a king. The fund saw nearly $1 billion in volume on its first day of trading as investors poured in. For many, this was their first chance to gain exposure to Bitcoin since institutional money managers usually can’t load up a Coinbase Global Inc. (NASDAQ: COIN) account with client capital. Anyone can now buy shares in the ETF (or options, if you’re so inclined), but you’ll need to ask yourself if the best use of your own capital is through buying this ETF or simply buying some Bitcoin (BTC) at the spot price.

How to Buy Proshares Bitcoin Strategy ETF (NYSE: BITO)

BITO isn’t the first attempt at a cryptocurrency ETF. For example, the Bitwise Cryptocurrency Innovators ETF (NASDAQ: BITQ) is also currently trading on U.S. exchanges, but it invests in public companies with exposure to Bitcoin and crypto, such as Coinbase Global Inc. (NASDAQ: COIN) and MicroStrategy Inc. (NASDAQ: MSTR). BITO purchases Bitcoin futures contracts and holds them until needing to roll them over as expiration approaches.

It’s important to note that BITO does NOT hold any Bitcoin directly. No cryptocurrency resides in its portfolio. Instead, the fund uses futures contracts in an attempt to mimic the price movements of BTC, but as most derivative traders will tell you, futures and spot prices don’t always line up. Just be sure to understand how this product actually works before dumping tons of capital into it.

Step 1: Pick a brokerage.

One of the biggest perks about launching this type of ETF is that investors can now own it through the same broker they use for their retirement accounts, taxable accounts and other investment vehicles. If you aren’t a fan of cryptocurrency exchanges like Coinbase and Gemini and have no desire to open an account with a broker like Robinhood Markets Inc. (NASDAQ: HOOD) or Webull, you can now get exposure to Bitcoin through traditional legacy brokers. 

Do you already have a preferred broker or are you looking to open a new account? If it’s the latter, take a look at Benzinga’s list of favorite brokers here.

Step 2: Decide how many shares you want.

Once you’ve established your trading account at a broker with BITO shares, you’ll need to figure out how many to buy. While ETFs are generally considered safer investments than individual stocks, BITO is a special case since it’s an investment product that holds cryptocurrency derivatives contracts. This isn’t your mom and pop’s SPY or QQQ. Consider your risk tolerance and exposure to other cryptocurrency products before deciding how many shares to purchase. Never devote too much capital to a single issue.

Step 3: Choose your order type.

Buying shares isn’t as simple as pressing a button or tapping a screen. You’ll need to decide how to order your shares, and that’s usually done via 2 choices: a market order or a limit order. A market order will immediately execute your trade for the best available market price. A limit order allows you to set a price point that will trigger activation of the order when reached. For example, if you entered a limit order for BITO shares at $42, the order will remain dormant until BITO shares reach $42, then it will be executed. Limit orders allow you to enter trades at ideal price points without keeping your eye on the stock continuously.

Step 4: Execute your trade. 

Once you’ve decided on a trade strategy, you’ll need to find an ideal entry point to start your position. Here’s where technical analysis comes in handy. By using concepts like support and resistance, you can execute your trade precisely and maximize your returns. Sure, getting shares at $44.50 instead of $44.75 may seem like a minimal gain, but when you’re buying in volume, those quarters can pile up.

Proshares Bitcoin Strategy ETF (NYSE: BITO) History

The ETF began trading on Oct. 18, 2021 at a price of around $40 per share. It reached a high around $44 in its first few days of trading as institutional and retail investors gobbled up shares like a hungry dog who found the Thanksgiving turkey unattended. As of this writing, the ETF already has more than $1.2 billion in assets under management.

BITO has little history to speak of as the U.S. Securities and Exchange Commission (SEC) only approved its launch within the last month. The question of who would bring the first Bitcoin ETF to market was a long-prophesied one, and now ProFunds (the parent company of Proshares) is the declared winner. Of course, more BTC and cryptocurrency related products are sure to follow, some of which may even hold actual coins in the portfolio. But for right now, BITO has the house to itself (so to speak).

Proshares Bitcoin Strategy ETF (NYSE: BITO) Restrictions for Retail Investors

Retail investors had little option for cryptocurrency exposure before the launch of this product. Most brokers aren’t interested in being custodians of cryptocurrency, and investors were forced to open accounts on crypto-specific exchanges. 

But now, anyone with an account at a traditional brokerage firm can add Bitcoin exposure to their portfolio through BITO. You can even own it on a tax-advantaged account like an IRA or Health Savings Account (HSA). Cryptocurrency with favorable tax treatment?  That’s a win-win for many retail investors.

Pros and Cons of Proshares Bitcoin Strategy ETF (NYSE: BITO)

Access to Bitcoin via traditional market exchangesExpensive to own compared with other ETFs
Add legitimacy to cryptocurrency sector in eyes of public market participantsFund does not hold any actual Bitcoin; only Bitcoin futures contracts that are rolled over as expiration approaches
Can now purchase a BTC-related investment product in tax-sheltered accounts like IRAsMany retail investors without compliance restrictions would be better off just owning Bitcoin

BITO Is the First of its Kind

The ProShares Bitcoin Strategy ETF indeed entered the market with a ton of pomp and circumstance, but for most of those already knee-deep into crypto, it’s nothing more than a passing headline. BITO allows a new class of investors to gain exposure to the cryptocurrency sector, but most interested parties have already invested directly in digital currencies through apps like Coinbase, Gemini, Robinhood or Webull.

And since futures contracts don’t always behave the same way as the spot price, most investors would be better off simply owning Bitcoin directly. You’ll pay commission and fees if you use a cryptocurrency exchange, but you’ll own the asset directly and don’t need to worry about complex derivative structures or expense ratios eating into profits.

Frequently Asked Questions


What does BITO hold?


BITO doesn’t actually hold any Bitcoin or cryptocurrency directly. Instead, it purchases and rolls over Bitcoin futures contracts, which are derivatives based on the spot price of BTC but don’t always follow that price in lockstep. BITO must constantly roll contracts over as well, which elevates expenses and can cause headaches for investors who don’t grasp how futures contracts work.


Is investing in BITO risky?


Cryptocurrency is a relatively new asset class, and prices can be extremely volatile in the short term. While ETFs are generally considered to be less volatile than individual stocks and derivatives, BITO still carries risk as futures contracts can also be volatile and a Bitcoin futures ETF is unchartered waters for market participants.