Bitcoin ETF: disappointing performance

BITO, which is the first US-approved ETF that replicates the price of Bitcoin, has not performed particularly well. 

The performance of the first Bitcoin ETF

In fact, it debuted on the markets around mid-October 2021 at a price around $41, but has now fallen below $30, a loss of 27%.  

In the same period, the price of BTC has fallen from $63,000 to $47,000, a loss of 25%. 

In other words, the price of BITO has lost more than the price of Bitcoin since its launch. 

This has happened despite the record highs of the first few days it was traded, i.e. days in which its price rose from $41 to almost $44, reached on 10 November, the same day as Bitcoin’s all-time price high. 

Thus on the one hand BITO seems to replicate the trend of BTC’s price quite well, although it underperforms it slightly. 

Bitcoin Futures ETFs vs Bitcoin Spot ETFs

It is worth mentioning that this is not an ETF based on actual BTC but on Futures contracts that replicate the price of BTC. 

In contrast, the Canadian Spot BTC ETF (BTCC.B) launched on the Toronto exchange has performed much better. Over the same period, its price fell from $11.6 to $8.9, a loss of less than 24%. 

In other words, the US Bitcoin Futures ETF performed worse than the same price of Bitcoin, while the Canadian ETF, backed directly by BTC, performed better than the price of Bitcoin. 

This difference suggests that should an ETF collateralized directly in Spot BTC be approved in the US, it could perform better than the sort of “hybrid” currently traded on US exchanges, which is based not on actual Bitcoin but on Futures contracts that replicate its price. 

The case of the Grayscale Bitcoin Trust

In reality, however, the Grayscale Bitcoin Trust (GBTC), which is not an ETF, has also performed badly. 

As of 19 October, its price has fallen from around $48 to the current $35, a loss of 27% similar to that of BITO. 

GBTC is collateralized in physical BTC, just like BTCC.B, so the difference in performance between the latter and BITO may not be due to the underlying. What GBTC and BITO have in common is that they are traded on the US markets, whereas BTCC.B is traded on the Toronto exchange. 

In light of this, it is possible to speculate that perhaps the eventual approval of an ETF on Spot BTC also in the US might not have the capacity to drive up the price of Bitcoin, and that the US financial markets seem to behave anomalously compared to e.g. the Canadian ones.