2x Bitcoin Strategy ETF Vs Competing Bitcoin Leverage

Summary BITX offers strong short-term returns and liquidity, but is not suitable for long-term holding due to leverage decay and high fees. Compared to peers, BITX leads in assets and volume, but lower-fee competitors like BITU and BTCL have outperformed on total return since July 2024. MSTR stock has delivered better long-term Bitcoin leverage than any 2x ETF, without the high management fees of BITX. While still bullish on Bitcoin, I advise caution with leverage now, as rising global conflict may pressure risk assets, including BTC. When I first covered the Volatility Shares 2x Bitcoin Strategy ETF (BATS: BITX ) for Seeking Alpha back in late 2023 , I noted the fund offered juicy returns but that buyers of the ticker should be careful. As a leveraged fund, BITX is not intended for long-term holding and is designed for shorter-term trading. Still, given the sustained uptrend that Bitcoin ( BTC-USD ) has been in since the launch of BITX back late-June 2023, the fund’s total return has actually been quite impressive for holders who have been hanging on this entire time. Data by YCharts While holding BITX since inception hasn’t generated double the 250% return of BTC since it has certainly outperformed the coin itself. I have to repeat again that holding BITX this long is not what the fund is intended for. And buying the fund during large price surges can actually be quite detrimental to investor returns. But as the chart above shows, there are times when going long BTX offers a sizable upside. Could we be at another one of those times right now? In this update, we’ll look at BITX compared to several other ‘leveraged Bitcoin’ options that the market has to offer. We’ll also get into my technical view of BTC at this point in time and look at how Bitcoin reacted to the escalation in the Middle East during the morning hours of June 13th. BITX vs. Peers BITX is not the only leveraged Bitcoin fund in the market. For this comparison, we’ll stack BITX up against the following funds: Proshares Ultra Bitcoin ETF ( BITU ) T-Rex 2x Long Bitcoin Daily Target ETF ( BTCL ) CoinShares/Valkyrie Bitcoin Futures Leveraged Strategy ETF ( BTFX ) Fund Comparison BITX BITU BTCL BTFX Issuer Volatility Shares Trust ProShares Rex Valkyrie ETF Trust II Inception 06/27/2023 04/01/2024 07/09/2024 02/21/2024 Expense Ratio 1.90% 0.95% 0.95% 1.86% AUM $2.85B $1.17B $51.83M $16.91M Source: Seeking Alpha, June 13th In terms of assets under management, BITX is the clear winner of the four funds, with nearly $3 billion in AUM. BITU has just under $1.2 billion, while BTCL and BTFX don’t even crack the $100 million threshold. BITX also happens to be the most expensive of the funds at 1.9%. My view is the expense matters more if you’re planning to hold something for a long period of time. For leveraged funds like these, as long as the fees are somewhat close, holders shouldn’t feel much of a difference in terms of total return. We’ll get into that metric shortly. I think one of the reasons why BITX has such a large AUM advantage over the other funds – beyond simply benefiting from first mover advantage – is that it pays out monthly dividends: Dividends BITX BITU BTCL BTFX Dividend Yield (TTM) 11.61% 5.06% 3.96% – Dividend Rate (TTM) $6.32 $2.61 $2.12 – Consecutive Years of Dividend Growth 0 Years 0 Years 0 Years – Dividend Frequency Monthly Monthly None – Source: Seeking Alpha, June 13th At a trailing twelve-month yield of 11.6%, BITX might be more appealing to potential buyers due to its larger payout than each of the other funds. BTFX is the only one that doesn’t pay a yield at all. Given three of these four funds pay out a yield and the varying expense ratios of the products, total return is an important consideration. In the chart below, I’m showing the total return of the four funds since the inception of the newest one, which is BTCL. If designed properly, these funds should generally perform in close tandem, and they do: Data by YCharts The out-performers are BITU and BTCL – given these are the two funds with the smallest expense ratios, this should not be surprising. What this tells us is that the yields offered by these funds are not strong enough reasons to hold leveraged funds longer than shareholders perhaps should. Another consideration is liquidity. As trading instruments, I would argue this matters far more than any dividend yield these products have to offer. Fund Liquidity BITX BITU BTCL BTFX AUM $2.85B $1.17B $51.83M $16.91M Average Daily Share Volume 7,499,749 2,231,130 82,910 6,615 Share Price $54.42 $51.53 $53.49 $52.78 Average Daily Dollar Volume $408.14M $114.97M $4.43M $349.16K Avg Vol/AUM* 14.3% 9.8% 7.7% 2.4% Source: Seeking Alpha, June 13th, *analyst’s calculation Here, BITX has another large edge over the rest of the leveraged funds in the market. At 14.3% average daily volume to AUM, traders who buy BITX have a better chance of getting in and out of their trades at the prices they want due to the stronger level of liquidity that the fund has over peers. Just for kicks, we can also compare the total returns of these tickers to something like Strategy ( MSTR ) common stock. That company is using leverage to orchestrate a massive Bitcoin flywheel that is currently working quite well to positive feedback loop BTC prices higher. Data by YCharts Here we see that MSTR shares have actually worked better as 2x leverage on Bitcoin than any of the actual 2x leveraged funds have. While all of the leveraged funds have outperformed Bitcoin since the inception of BTCL in July 2024, only MSTR shares have generated price returns double that of BTC. In fact, the 190% return has actually been more than double the 83% return of Bitcoin. And the real kicker is, MSTR doesn’t charge a 1.9% management fee. Price Action Indications While there are exceptions, I generally prefer to look at Bitcoin through the weekly chart rather than anything shorter when I’m assessing directional cues: Bitcoin Weekly Chart (TrendSpider) Something that I’ve been pointing out for years is the relationship between the 8 and 20-week simple MAs. These levels are still favoring bulls in my view, but the conviction is becoming concerning in the 20-week MA. Unlike the 8 weeks, the 20 is no longer in a clear uptrend. This could indicate that we’re getting closer to a short-term top in the coin. I should also point out the fairly obvious negative divergence in the weekly RSI. New highs in coin price are accompanied by lower highs in RSI. This is typically viewed as bearish behavior. As was the early morning action on June 13th: 5-day BTC vs XAU (Seeking Alpha) As tribal as these investment communities can be, I’ll reiterate that I’ve long been of the view that investors with an anti-fiat philosophy haven’t had to choose between Bitcoin and Gold ( XAUUSD:CUR ) when they can simply buy both. Though I’ve primarily covered Bitcoin and Digital Assets for Seeking Alpha over the last several years, I’ve been an advocate for Gold for longer. The escalation between Israel and Iran was met with action in the financial markets. For better or worse, Gold was viewed as the safe, risk-off asset, while Bitcoin was viewed as the opposite. Closing Summary BITX will work perfectly fine as a short-term trade for Bitcoiners or speculators who want leverage on Bitcoin’s price moves. Despite the fund not experiencing the level of decay that has been seen in other leveraged ETF products, I maintain that BITX is not a product that should be held long-term. For long-term Bitcoin leverage, MSTR has been a far better alternative. Whether that remains the case is unknowable. Finally, while I’m still bullish on Bitcoin and have my core position, I don’t think this is the time to be playing around with leverage on top of what is already a volatile asset. Given the increasing level of global conflict, I suspect we’ll see pressure on risk assets broadly. I doubt Bitcoin will be immune from that.

Source: Seeking Alpha