Summary BITO has underperformed Bitcoin significantly due to structural issues like contango, high expense ratios, and tax burdens, leading to a "hold" rating. BITO tracks Bitcoin futures, not spot prices, causing inefficiencies and higher costs compared to spot ETFs like IBIT, which holds actual Bitcoin. Despite political and economic factors favoring Bitcoin, technical indicators suggest potential volatility, making it uncertain if BITO will hold above $17 or fall to $10. Given the tracking errors and mixed signals from technical analysis, I recommend holding BITO rather than buying or selling in this uncertain environment. ProShares Bitcoin ETF ( BITO ) is falling since the beginning of 2025 and lost 18.32% of its value so far. That’s why it doesn’t offer an investment opportunity as advantageous as Bitcoin itself, although it varies depending on the type of investor. In this article, I will explain the reasons for this in detail. I’d like to start the article by comparing returns of Bitcoin with the returns of BITO because many investors are wondering why BITO is not performing as well as IBIT or Bitcoin itself. TradingView Since BITO’s launch in October 2021 it lost 53.77% of its value, while Bitcoin has gained 35.08%. Both instruments reflect Bitcoin’s price movements, but structural differences in design are leading to a significant and permanent performance difference. Similarly, when I calculate the annual expected return rates, BITO has an expected return of 3.17% since 2022 while Bitcoin has an expected return of 51.17%. There is a truly huge difference between the two. So what causes this difference? Understanding BITO BITO tracks futures contracts traded on the CME instead of holding Bitcoin directly. While this allows the fund to operate within regulatory circles it introduces negative complications such as contango and rollover costs too. The fund periodically rolls over expiring contracts into longer-term contracts which is insuring costs. Unlike BITO, for example IBIT completely eliminates the problems and costs associated with futures trading because it holds actual Bitcoin for the fund. BITO’s reliance on futures creates contango. Contango means longer-term contracts trade at a premium to shorter-term ones. Contango intensifies during bull markets, especially after March 2023 which forced BITO to sell low and buy high on a monthly basis. iShares Bitcoin Trust ( IBIT ) 0.25% Grayscale Bitcoin Mini Trust ( BTC ) 0.15% Franklin Bitcoin ( EZBC ) 0.19% Bitwise Bitcoin ETF ( BITB ) 0.20% VanEck Bitcoin ETF ( HODL ) 0.20% ARK 21Shares Bitcoin ETF ( ARKB ) 0.21% Fidelity Wise Origin Bitcoin Fund (FBTC) 0.25% WisdomTree Bitcoin Fund (BTCW) 0.25% Median 0.21% In addition to that BITO’s expense ratio is really high. While the median expense ratio of spot Bitcoin holding ETFs is generally around 0.21%, BITO’s expense ratio is significantly higher than this ratio with 0.95%. Global X Blockchain & Bitcoin Strategy ETF ( BITS ) 0.65% CoinShares Bitcoin Miners ETF ( WGMI ) 0.75% Bitwise Trendwise Bitcoin and Treasury Rotation Strategy ETF ( BITC ) 0.85% CoinShares Bitcoin and Ether Strategy ETF ( BTF ) 1.24% Median 0.80% Maybe it’s not right to compare the futures ETF with the spot. That's why I took the median of the futures ETFs expense ratios, which resulted 0.80%. BITO has a lower expense ratio than BTF, but it still has an expense ratio above the median. This expense ratio also seriously affects the performance of the fund. In addition to these expenses, there is also the issue of dividend distribution. BITO distributes monthly dividends from futures earnings and taxes them as ordinary income (up to 37% federal rate). On the other hand, spot ETF’s can delay these taxes until the sale. Since this tax burden is compounded, it is also written off as a burden on performance. BITO seems to be a less efficient investment, both compared to Bitcoin itself and spot ETFs. So if this inefficiency is weighing on performance, why do I have a “hold” position instead of a “sell” position? This is a decision that depends entirely on Bitcoin's own performance. After all BITO is a Bitcoin fund and even though its performance is not exactly the same, it aims to reflect Bitcoin's movements. So I will analyze Bitcoin technically and determine whether BITO can compensate for its expenses. Charting TradingView Historically, I see that Bitcoin has been in a constant logarithmic upward trend. In addition, when the average return of each year is calculated since 2018, when Bitcoin began to mature, the expected return is at 76.75%. Therefore, I think that this performance will compensate for BITO's expenses in the long run. TradingView When I focus on shorter term I see that Bitcoin moves in accordance with the 80 and 500-week weighted moving averages. Bitcoin supported from the 80-week moving average about 3 times in the bull run after 2023. I think this moving average is critical for Bitcoin even right now. The 80-week moving average is at $74,200. If Bitcoin holds at this level, it means that BITO will find support at $17 proportionally. As long as it holds at this level and continues its run, I think BITO will be able to cover its costs, but it will still significantly underperform compared to Bitcoin or spot ETFs due to contango. I think after finding, the support target level is going to be maximum $28 for BITO. TradingView But if Bitcoin cannot hold at this level, I have to start talking about the price action support level of $53,000 and the 500-week moving average level of $34,433 which means a bearish call. In this scenario, I think BITO will fall by the amount of Bitcoin's loss of value + other costs. We saw this in practice in 2024. While Bitcoin was suppressed and lost about 27% of its value from March to September, BITO lost up to 52% in this period. This indicates an additional 25% loss in value. Therefore, my analysis shows that a drop to the $53,000 support will take BITO down to $10. I have to say that both possibilities are really close to each other, which is the biggest reason why I keep a "hold" position. The changes in the global political and economic ground generally seem to be in favor of Bitcoin. President Trump recently signed a decree by keeping his promise to hold Bitcoin in the Federal Reserve and organized the first crypto summit at the White House. Plus US holds 212,000 Bitcoins , China 194,000, the UK 61,000 and this number continues to increase every day. So in the global political and economic arena, states have started to turn to Bitcoin for certain reasons and this naturally increases the demand for Bitcoin. So the increase in these developments will contribute to Bitcoin remaining above the 80-week moving average. But at the same time, the RSI indicator’s bearish divergence formation reminds me of 2021 in technical terms. This negative formation is a sign that the price is not met with enough momentum and is inclined to slow decline. In addition, the MACD indicator’s death cross is another negative signal. So if this selling pressure continues we can witness a break of $74,200. Risks BITO exhibits a serious tracking error due to its structure based on futures. While spot ETFs such as IBIT have tracking error rates of 0.5% this rate is between 5-10% annually for BITO. This means that the fall or surge of Bitcoin will be reflected in BITO in a very different way. Therefore, the risk may increase unexpectedly. Conclusion Political and global economic developments have begun to take shape in favor of Bitcoin. This could cause BITO to hold above $17 and run to $28. However, technical analysis also indicates that BITO will be undecided about whether to hold at this level and could fall to $10. In this uncertain environment, I am staying on the side of holding rather than buying or selling.
