You can gain exposure to Bitcoin (BTC) right from a regular brokerage account—no need for a cryptocurrency exchange or self-custody.
How? Through Bitcoin exchange-traded funds (ETFs), with one of the most notable examples being the ProShares Bitcoin Futures ETF (BITO).
This guide explains what BITO is, how it works, provides a step-by-step guide for buying the ETF, and weighs its pros and cons.
What Is BITO?
BITO is an open-ended investment fund that trades on an exchange under its own ticker symbol, allowing you to buy shares like any other stock.
When you invest in BITO, your money goes into a portfolio composed of two main assets:
1. CME Bitcoin Futures and Swaps
These contracts let investors speculate on or hedge against Bitcoin’s future price movements. Instead of owning Bitcoin directly, BITO holds futures contracts to mirror Bitcoin’s performance as closely as possible.
2. Treasury Bills
These short-term government securities act as collateral for the futures contracts, providing stability to back the fund’s volatile Bitcoin futures investments.
BITO’s goal is to offer exposure to Bitcoin futures’ risks and returns, which aim to align with Bitcoin’s spot price (though slight differences may occur). Unlike many ETFs, BITO is actively managed and pays a monthly distribution from futures profits and collateral interest.
👉 Learn more about Bitcoin ETFs
How to Buy BITO
Buying BITO shares is similar to investing in most ETFs. Follow these steps:
- Open a brokerage account: Choose a broker that supports ETF trading and cryptocurrency ETFs (not all do).
- Determine your investment: Decide how much to invest based on your risk tolerance and financial goals.
- Search for BITO: Use the ticker symbol "BITO" and ensure you’re buying shares, not options.
- Place your order: Specify the number of shares and price (for limit orders).
After purchase, your account will reflect the BITO shares.
Pro Tip: To receive BITO’s monthly distribution, hold shares before and on the ex-dividend date (typically the first trading day of each month).
BITO’s Holdings
BITO’s portfolio includes:
1. Bitcoin Futures
Example: CME Bitcoin Futures expiring Sept. 27, 2024. These contracts provide Bitcoin price exposure without direct ownership.
2. Index Swaps
Agreements (e.g., with Société Générale) to exchange returns based on Bitcoin futures indices, enhancing price replication.
3. Treasury Bills
Low-risk collateral for futures/swaps, ensuring portfolio stability.
BITO’s website updates holdings daily, showing weights, contract counts, and notional values.
Should You Invest in BITO?
BITO suits investors who:
- Want Bitcoin futures exposure.
- Prefer brokerage accounts over crypto exchanges/self-custody.
- Accept high volatility and complex derivatives.
- Seek monthly crypto-linked income.
If this aligns with your strategy, BITO could fit your portfolio.
👉 Explore Bitcoin investment strategies
Dividends and Performance
Does BITO Pay Dividends?
Yes. BITO pays monthly distributions, often categorized as dividends or capital gains. Yields fluctuate historically (~50% average), but past performance doesn’t guarantee future results.
Expense Ratio
BITO charges 0.95% annually ($95 per $10,000 investment). This covers active management and derivatives use—reasonable for its strategy but higher than typical ETFs.
Historical Performance
| Time Frame | BITO (Market Price) | BITO (NAV) |
|------------------|---------------------|-----------------|
| 3 Months | 8.34% | 8.31% |
| 6 Months | 46.29% | 46.46% |
| 1 Year | 104.28% | 104.48% |
| Since Inception | -3.47% | -3.45% |
(Data as of July 31, 2024)
The Bottom Line
BITO offers Bitcoin exposure without self-custody, using futures and Treasury bills while paying monthly dividends. However, it carries high volatility and a 0.95% expense ratio. Suitable for risk-tolerant investors seeking crypto-linked income in traditional brokerage accounts.
FAQ
How do I buy BITO?
Search for the ticker "BITO," specify shares (not options), and complete your order.
Is BITO a good investment?
For high-risk investors seeking Bitcoin-linked income, yes—but weigh its volatility and fees.
Can I trade Bitcoin futures directly?
Yes, via a margin-enabled brokerage account with futures trading privileges.
How do I invest in a Bitcoin ETF?
Search its ticker (e.g., BITO) and purchase shares at your desired price/quantity.
Disclaimer: This article is for educational purposes only. Conduct your own research before investing.