According to Charlie Bilello, CEO of Compound Capital Advisors, Bitcoin futures ETFs underperformed much less than spot Bitcoin, losing 19% against the 9% depreciation spot lost.
In the table titled “Returns since start”, two rows show the performance of the ProShares ETF and the ‘spot’ against the dollar. Bitcoin (BTC)‘ reflected the trading pair. While the two lines act in perfect correlation, the outcome of an investment in the two assets was quite different.
Incorrect Calculations
Compound CEO criticized the futures-backed ETF’s performance, while Bloomberg ETF analyst Eric Balchunas pointed out the inaccuracy of the data provided. Balchunas said in his tweet that the fund is tracked at a monthly rate of 2.5%, which allows it to roll at 10-15% annually instead of 40%.
The first Bitcoin futures ETF raised over $1 billion in its first 2 days, the fastest an ETF has ever hit that mark.
It’s down 19% since launching vs. a 9% decline for Bitcoin. Why the differential? Contango, where bitcoin futures price > spot, causing a negative roll yield. pic.twitter.com/QjpvrViDpu
— Charlie Bilello (@charliabilello) December 5, 2021
According to services like Yahoo Finance, the fund actually trades at a premium of around 2% compared to spot asset, rather than 10% from data provided by Compound CEO Bilello.
The difference between spot performance and ETF is explained by “contango”, a condition where the price of an underlying asset is traded at a discount compared to the price of futures for the same asset.
With such a difference in the market, exchange traded funds backed by futures instead of a real spot asset have no choice but to sign a new contract at a higher price at the end of each month. The usual premium for ETF investors stays around 1-2% per month.
While ProShares’ futures-backed ETF broke the record for one of the largest entries into the fund in the early days of trading, its performance was far from optimal.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.