Far from being the safe haven many had hoped it could be, bitcoin has acted like any other risky financial asset this year. The price of the cryptocurrency tumbled nearly 50% since the start of 2022, five times the 10.4% decline in the S&P 500.
Gold, another widely touted haven that is sometimes seen as a rival to bitcoin, has easily outperformed, losing only 4% of its value since the start of the year.
Year-to-Date Price Returns
The handful of bitcoin ETFs that trade in the U.S. have performed in line with bitcoin itself. The ProShares Bitcoin Strategy ETF (BITO), the first U.S.-listed cryptocurrency ETF, which launched last October, is down around 50% since the start of the year.
Subsequent launches, including the VanEck Bitcoin Strategy ETF (XBTF) and the Valkyrie Bitcoin Strategy ETF (BTF), which employ similar strategies of holding front-month bitcoin futures contracts, are also around 50% lower
While the cost of trading futures contracts is a concern for some investors, they haven’t really subtracted much from these ETFs’ returns this year.
John Hyland, a retired ETF executive and longtime investment industry professional, has written that the difference in returns for spot and futures-based bitcoin ETFs should be minimal. That hypothesis seems to be proving true—though investors don’t seem to care.
Total assets in the three front-month-holding bitcoin futures ETFs are less than $900 million, with the bulk of that in BITO. That’s a disappointing figure for the first ETFs to hold an asset as popular as bitcoin.
Analysts had predicted that the first bitcoin ETF would easily accumulate multiple billions of dollars—which may still end up being the case for the first spot bitcoin ETF or a fund that holds actual bitcoin rather than bitcoin futures.
There are few signs that the SEC will allow a spot bitcoin to trade in the U.S. anytime soon. Grayscale Investments sued the regulator in June after it prevented the Grayscale Bitcoin Trust (GTBC) from converting into a spot bitcoin ETF. Grayscale’s CEO Michael Sonnenshein expects a ruling in that case within a year.
BITS & CRYP: Futures-Based Funds
For U.S. ETF investors seeking bitcoin exposure, futures-based funds are all they have access to. In addition to BITO, XBTF and BTF, they can consider the Global X Blockchain and Bitcoin Strategy ETF (BITS) and the AdvisorShares Managed Bitcoin Strategy ETF (CRYP) as well.
CRYP holds a combination of bitcoin futures and fixed income securities, swapping between the two opportunistically. It’s a strategy that’s delivered a -29% return since the fund’s inception in April, better than the 40% loss in bitcoin since that date.
Meanwhile, BITS holds a combination of bitcoin futures and blockchain-focused companies. The latter have performed even worse than bitcoin itself, so this ETF has underperformed year to date, with a loss of 56%.
Despite this year’s carnage in the cryptomarkets, there is still hope that bitcoin and crypto more broadly can revolutionize many parts of the world—including the financial markets themselves. After all, safe haven or not, bitcoin is still an asset worth $447 billion, and all cryptocurrencies combined are worth $1.1 trillion, according to CoinMarketCap.
Follow Sumit Roy on Twitter @sumitroy2