Is ProShares Bitcoin Strategy ETF A Good Investment?

This bitcoin-centric ETF allows investors to safely enter the world of the popular crypto, so, is Bitcoin Strategy ETF a good investment?

Oct. 26, 2021

As soon as ProShares Bitcoin Strategy ETF (NYSEARCA: BITO) launched, the price of Bitcoin skyrocketed to an all-time high of nearly $67,000; not the least bit surprising since the popular cryptocurrency is known for wild price fluctuations. Investors flocked to the ETF, as evidenced by its trade volume, which exceeded 20 million daily trades in its first two days on the market. 

Cryptocurrency, and particularly Bitcoin, has been a hot topic for the last decade from its notorious beginnings on ‘Silk Road’ to Tesla accepting the digital token for payments and purchases (although intermittently). The trouble with Bitcoin has primarily been safety as it exists in the digital realm and is thus exposed to all sorts of hacking activity. Now available as a new instrument, is ProShares Bitcoin Strategy ETF (abbreviated BITO) a good investment?

The bull case for BITO

Investing in Bitcoin directly is an expensive proposition and once you own some, safeguarding it can be even pricier. Whether you use an exchange-based digital wallet or a personal one, you’re exposed to all sorts of potential hacking activity and cold storage solutions (offline) can break and are impractical for crypto traders. The expense ratio for BITO is 0.95%, which is half of what you would pay for exchange-traded notes (ETNs) or the Grayscale Bitcoin Trust; the pricing is more accurate to boot. 

Ultimately, this first-of-its-kind ETF could serve to further legitimize Bitcoin and other cryptocurrencies and could do to Bitcoin what the first gold ETF (GLD) did for gold; that is send it soaring sky-high. 

The bear case for BITO

Bitcoin’s price has fluctuated wildly in the last decade and this pattern will no doubt affect BITO’s price. When Tesla announced its foray into the Bitcoin realm, its price surged nearly 20% on trade volumes exceeding 100 million; then when the company abandoned the currency, its price slid nearly 15%. Elon Musk abandoned Bitcoin when he learned the impact that mining has on the environment due to its heavy usage of electricity (larger carbon footprint). He will only return to the controversial unit if miners adopt the usage of sustainable energy for their activities.

Why put up with the expense ratios of various trade instruments when you can just buy Bitcoin directly from Robinhood or PayPal? Also, exposing Bitcoin to the market opens it up to all sorts of manipulation from the likes of short traders, which will only serve to further drive price swings.

So, is BITO a good investment?

I would steer clear for a few quarters to let all the hype and wild price fluctuations simmer down. BITO’s premiere also sets the stage for future Bitcoin and crypto ETFs that will no doubt offer lower expense ratios and offer more bang for your buck.