This fund looks like a surprise winner of the bitcoin ETF approval

Published Fri, Feb 2 202411:45 AM ESTUpdated Fri, Feb 2 202412:53 PM EST

Jesse Pound @/in/jesse-pound @jesserpound

Last month's approval of the first bitcoin exchange-traded funds in the United States sparked a fierce battle between new players to attract the most money, but it may also be helping an incumbent fund that was already popular with traders. The ProShares Bitcoin Strategy ETF (BITO) has brought in $129 million of net inflows so far in 2024, bringing its total assets to $1.8 billion, according to FactSet, despite all the new options for investing in bitcoin. The average number of shares traded daily has also been higher this year than in the final months of 2023, even when accounting for the dramatic volume spikes in the days immediately following the ETF approvals. The fund has a total return of 1.25% year to date. BITO YTD mountain ProShares' BITO has delivered a positive return this year, while also attracting higher trading volume and net inflows. "We're trading well, and the assets are holding up, and we think that's a testimony to the efficacy of a futures-based solution. And it still remains the case that bitcoin futures are regulated, and spot bitcoin is not," Simeon Hyman, head of the investment strategy group at ProShares, told CNBC. The increased interest has come despite the fact that the fund has an expense ratio of 0.95% — well above most of the spot bitcoin ETFs — and the fact that tracking futures can lead the fund to diverge from bitcoin itself. One theory for why the futures ETF has continued to have success is that there are listed options for bitcoin futures products, but not for the spot products, said Aniket Ullal, head of ETF data and analytics at CFRA. "In other words, there's an institutional market that still cares about the fact that there's options on the futures products," Ullal said. Hyman also pointed to the fact that BITO still trades at a tighter spread to its net asset value than the spot products as a potential reason for the fund's continued popularity. The ProShares futures ETF may also be getting helped by increased action in the futures market itself. Futures trading volume spiked around the approval and launch of the spot ETFs, potentially a sign that investors were using futures as hedges in trades related to the launch. According to the CME Group, the average daily volume for bitcoin futures in January was up 65% year over year, and 34% month over month. Futures volume has receded since spiking around the approval date, with the daily average from Jan. 22 through the end of the month roughly equal to the November numbers. "While it's too early to know how the approval of spot bitcoin ETFs will impact all marketplace participants, we believe this development will be a net positive for the overall crypto ecosystem. We continue to hear from clients that our regulated bitcoin futures, as well as overall crypto complex, will remain a vital part of the price discovery process, and allow them to continue to hedge against any potentially market moving events," Tim McCourt, global head of financial and over-the-counter products at CME Group, said in a statement. To be sure, not all bitcoin futures products are going strong. VanEck announced Jan. 17 that it was liquidating its bitcoin futures ETF. "Even before the spot products launched, BITO was kind of the runaway winner ... in the futures space. I think because one launched earlier and maybe just from a marketing [perspective], the ProShares one has just kind of dominated," Ullal said.