One year after its record launch, the world’s first exchange-traded fund (ETF) to track the price of bitcoin has lost more investor dollars than any other ETF debut.
Asset manager ProShares launched the Bitcoin Strategy Fund in October 2021, and it instantly became Most successful A new ETF in history, raising over $1 billion in its first week of trading on the New York Stock Exchange.
Bitcoin enthusiasts have announced that the launch is the moment when crypto joins the world’s largest stock market and immerses itself in mainstream investment Strategies for both retail and institutional buyers.
But a year into its existence, the fund has lost money on an unprecedented scale, according to data from Morningstar Direct for the Financial Times.
And its stock price drop of 70 percent makes this the sixth worst debut in terms of performance ETF of its kind all the time, in test for investors during what has become known as the “crypto winter”.
“We’ve seen money drop right out of the gate in this way, but it rarely pulls in so many assets so soon after launch like [this] said Jeffrey Ptak, chief ratings officer at Morningstar Research Services.
The ETF, known as BITO, has attracted inflows continuously throughout its life, with only light withdrawals. But even with net inflows of $1.8 billion in its debut year, its assets now stand at $624 million. Given the timing of inflows and a 70 percent drop in the fund’s stock price, Morningstar calculates that BITO lost $1.2 billion in investor money, making it the biggest first-time loser.
Other ETFs fell more in their first year, but they were all much smaller. The Global X Blockchain ETF (BKCH) – another crypto-related fund – fell 76.7 percent in its first year of operation through July, but peaked at $125 million in assets and now has just $60 million.
“Since its launch, BITO has closely tracked bitcoin, which we believe our shareholders want from the fund,” ProShares said in a statement.
At the time of BITO’s launch, ProShares CEO Michael Sapir said it was a milestone in the $8.4 trillion ETF industry, on par with the first US equity fund in 1993, the first fixed income fund in 2002 and the first gold fund in 2004 The highly anticipated BITO launch helped propel the bitcoin price from $63,000 on launch day to record highs near $70,000.
But in November of last year, it became clear that US interest rates would start to rise, hitting speculative assets. The ETF tracked the 69 percent slide in bitcoin itself, while the cost of maintaining the futures contracts it relied on also affected its earnings. The token has been trading around $20,000 for four months.
Earlier this year, Jeff Dorman, chief investment officer at asset manager Arca, said that “Bitcoin. . . It’s completely lost its narrative – it’s not an inflation hedge, it’s not unrelated [to other assets] And they don’t act defensively.”
Some investors remain loyal to the crypto cause. Buyers have “remained very loyal to bitcoin’s long-term thesis,” said Todd Rosenbluth, head of research at consultancy VettaFi, with net inflows of $87 million to BITO in the past six months despite the price crash.
“The fund hasn’t seen the outflows one would expect given its performance,” Rosenbluth said. “The pendulum has swung away from some investment propositions this year. Historically it could swing in its favour, but the challenge is whether the asset manager has the confidence to keep the product afloat.
Additional reporting by Scott Shipulina
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