Is the 2x Bitcoin Strategy ETF (BITX) a Good Buy?
Bitcoin's price has outperformed traditional assets like stocks and commodities this year. It has risen by over 30%, while the Nasdaq 100 and S&P 500 have risen by less than 21%.
The 2x Bitcoin Strategy ETF (BITX) has also done well, rallying by 26% this year. Its assets have grown to over $1.4 billion. So, is the BITX ETF a good investment?
What is the 2x Bitcoin Strategy ETF?
Leveraged ETFs, like the ProShares UltraPro QQQ ETF (TQQQ) and the Direxion Daily Semiconductor Bull 3x Shares ETF (SOXL), are popular among risk-takers. The 2x Bitcoin Strategy ETF aims to deliver daily returns that are twice the performance of the S&P CME Bitcoin Futures Daily Roll Index.
The fund adjusts its holdings each day to maintain a 2x exposure. If Bitcoin futures rise by 1%, the BITX ETF aims to rise by 2%. Historically, Bitcoin futures track the spot Bitcoin price well.
Opportunities and Risks for the BITX ETF
Recently, the BITX ETF hasn't done well because Bitcoin is in a bear market. The German government, Mt. Gox, and Bitcoin miners are all selling large amounts of Bitcoin, adding pressure. Summer is also a slow period for Bitcoin.
In the long term, Bitcoin's price may rise, benefiting the BITX ETF. However, the fund faces some risks:
1️⃣ High Expenses: The expense ratio is 1.90%. For comparison, the iShares Bitcoin ETF (IBIT) has a 0.25% expense ratio. $10,000 in BITX will cost $190 in the first year.
2️⃣ Performance: BITX has underperformed Bitcoin since its start in 2023. Bitcoin rose 89.4% in the past year, while BITX rose 86.30%. This year, Bitcoin rose 29.86%, and BITX rose 26%.
3️⃣ Volatility: The crypto market is highly cyclical. For example, Bitcoin dropped from over $28,000 in 2021 to $15,800 in 2022. BITX would see deeper drawdowns in such scenarios.
Conclusion
BITX ETF offers potential high returns but comes with high expenses and risks.
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