ProShares Bitcoin ETF Stock Price, News & Analysis

The ProShares Bitcoin ETF (BITO) is described by ProShares as the first U.S. bitcoin-linked exchange-traded fund. According to ProShares, BITO gives investors access to bitcoin-linked exposure through an ETF structure while emphasizing that the fund does not directly invest in bitcoin. Instead, BITO invests in bitcoin futures and swaps, and its performance can differ from the spot, or cash, price of bitcoin.

ProShares characterizes BITO as an actively managed ETF. The fund seeks to obtain exposure to bitcoin through derivatives such as futures contracts, with the costs and mechanics of rolling futures, as well as margin and collateral requirements, identified as important factors that can affect performance and may prevent the fund from achieving its stated objective. ProShares also notes that BITO is non-diversified and concentrates its investments, which can contribute to higher volatility.

In its risk disclosures, ProShares highlights that bitcoin and bitcoin futures are relatively new asset classes and that the market for bitcoin is subject to rapid changes and uncertainty. The company states that bitcoin is largely unregulated and may be more susceptible to fraud and manipulation than more regulated investments. It further notes that bitcoin is subject to unique and substantial risks, including significant price volatility and potential lack of liquidity, and that the value of an investment in the ETF could decline significantly and without warning, including to zero.

ProShares explains that the price and performance of bitcoin futures held by BITO should be expected to differ from the current spot price of bitcoin, and that these differences could be significant. The firm also points to the impact of margin requirements, collateral requirements, and other limits on the use of futures contracts as potential constraints on the fund’s ability to meet its investment objective.

BITO is part of a broader lineup of ETFs offered by ProShares. ProShares describes itself as a premier provider of ETFs that has been at the forefront of the ETF market since 2006, with experience in strategies such as dividend growth, interest rate hedged bond, thematic, crypto-linked, and geared (leveraged and inverse) ETF investing. ProShares states that it has launched products such as BITO and other thematic and crypto-linked funds as part of its focus on providing strategic and tactical opportunities for investors to manage risk and pursue returns.

According to ProShares, the firm and its mutual fund affiliate, ProFunds, manage assets across a large ETF lineup and mutual funds. ProShares notes that it has been involved in product development across multiple market segments and investment objectives, and that BITO exemplifies its efforts to offer first-to-market opportunities in emerging areas such as bitcoin-linked investing.

BITO’s investment approach and structure

ProShares states that BITO invests in bitcoin futures and swaps rather than holding bitcoin directly. The fund is actively managed, and its managers seek to maintain exposure to bitcoin futures contracts while managing the effects of rolling those contracts over time. ProShares indicates that the costs associated with rolling futures, as well as the impact of margin and collateral requirements, can negatively affect performance.

The company emphasizes that BITO is non-diversified and concentrates its investments, which means that its portfolio is focused rather than spread across a broad range of assets. ProShares notes that non-diversified and narrowly focused investments typically exhibit higher volatility, which can result in larger swings in the fund’s value.

Risk considerations highlighted by ProShares

ProShares’ disclosures underscore that investing in BITO involves significant risk. The firm notes that investing involves the possible loss of principal and that there is no guarantee any ProShares ETF, including BITO, will achieve its investment objective. For BITO specifically, ProShares highlights the following points:

• BITO invests in futures and swaps and does not directly invest in bitcoin.
• Bitcoin is described as a relatively new asset class with a market subject to rapid changes and uncertainty.
• Bitcoin is largely unregulated and may be more susceptible to fraud and manipulation than more regulated investments.
• Bitcoin and bitcoin futures are subject to significant price volatility and potential lack of liquidity.
• The value of an investment in BITO could decline significantly and without warning, including to zero.
• The price and performance of bitcoin futures should be expected to differ from the current spot price of bitcoin, and these differences could be significant.
• BITO is non-diversified and concentrates its investments, which can contribute to higher volatility.

ProShares advises investors to carefully consider the investment objectives, risks, charges, and expenses of ProShares funds before investing and to review the summary and full prospectuses for a more complete description of risks.

Relationship to the broader ProShares product lineup

BITO is presented by ProShares as part of its crypto-linked ETF offerings. ProShares notes that it has introduced other bitcoin-related products, including a short bitcoin strategy ETF (BITI) that seeks to deliver the inverse of the performance of a bitcoin futures index on a daily basis. ProShares also references its thematic funds, such as a metaverse ETF (VERS), as examples of its approach to creating funds that target specific themes and strategies.

Across its communications, ProShares describes itself as having been at the forefront of the ETF revolution since 2006, offering one of the largest ETF lineups and managing assets together with its affiliates. The firm highlights its experience in dividend growth, interest rate hedged bond, thematic, crypto-linked, and geared ETF strategies, and positions BITO within this broader context of product development.

Key points for potential BITO investors

Based on ProShares’ own descriptions and risk disclosures, BITO is intended for investors who want exposure to bitcoin-linked returns through an ETF that uses futures and swaps rather than direct bitcoin holdings. ProShares emphasizes that the fund is actively managed, non-diversified, and concentrated, and that it operates in a market characterized by high volatility, regulatory uncertainty, and potential liquidity constraints.

ProShares repeatedly notes that there is no guarantee that BITO will achieve its investment objective and that investors could lose the full value of their investment. The firm directs investors to the fund’s prospectuses for detailed information on its strategy, risks, and costs.