BTCO: That Was A Great Run (Rating Downgrade)

Summary A bull run in Bitcoin this year ensured excellent performance of related Bitcoin ETFs like the BTCO. Nonetheless, investors should be selective when picking a BTC ETF to invest in. Invesco Galaxy Bitcoin ETF is far from being competitive among other available options. Thus, I downgrade BTCO to Hold. If you invested in Bitcoin at the beginning of the year, most likely you’ve earned solid gains on your BTC investments. My bullish bet on Bitcoin through the Invesco Galaxy Bitcoin ETF ( BTCO ) performed wonderfully, outpacing the S&P 500 index by a huge margin. However, the Bitcoin ETF landscape keeps evolving, so it’s time to reconsider the tools used to get exposure to Bitcoin. I stay positive on the long-term prospects of Bitcoin amid the global interest rate cutting cycle, though I downgrade the BTCO ETF to Hold as there are cheaper and more liquid alternatives out there. BTCO ETF Overview According to the fund’s description , Invesco Galaxy Bitcoin ETF is an exchange-traded fund that reflects the performance of the spot price of Bitcoin as measured using the Lukka Prime Reference Rate , less the fund’s expenses and other liabilities. As of late September 2024, the BTCO ETF has only $531 million of assets under management, which is not much compared to other BTC ETFs. Together with the expense ratio of 0.25%, the BTCO doesn’t look like an optimal option these days. Seeking Alpha Let’s compare the BTCO ETF with peer funds. For comparison, I’ve picked the other four most liquid spot BTC ETFs. The iShares Bitcoin Trust ETF (IBIT) looks the best of the bunch, with just a 0.12% expense ratio and an immensely larger AUM. It should be noted that even though the stated expense ratio for the BITB is 0.00%, the actual expense fee is 0.20% because the fee waiver has already expired. Seeking Alpha IBIT’s bid/ask spread is more than five times better compared to the BTCO ETFs, which is especially important if you want to trade bitcoin-related ETFs frequently. Seeking Alpha Overall, I’d like to see more competition in the spot BTC ETF space. In my opinion, competing ETF providers need to take more aggressive action to counter the growing dominance of the IBIT ETF, which has been strengthened even more after the SEC approved options trading for the IBIT. Performance Recap Since my previous article in late January, the BTCO grew by more than 53%, greatly outperforming the S&P 500 index. Seeking Alpha The BTC performance was quite shaky throughout the year, but the latest rate cut from the Fed has ignited the interest of the public again, with the rate cut cycle serving as a major near-term tailwind for Bitcoin. There’s Still A Gap To Be Closed My approach to trading Bitcoin heavily relies on the correlation between the BTC price and the S&P 500 index. As we can see, the BTC price moves largely together with the index, with short-term spikes usually caused by overly positive or negative investors’ sentiment. TradingView The BTC price needs to reach at least $71000 to match the current level of the S&P 500. For me, it’s hard to imagine the BTC price lagging behind the S&P 500 for too long amid rate cuts. Also, I’d like to highlight an interesting seasonality pattern for the BTC. Historically, if September ended in green for Bitcoin, then there was a whole quarter of growth. Coinglass There’s no guarantee that this pattern will repeat itself this year, though positive BTC performance this September still improves chances of robust returns until the end of the year. The Bottom Line The reason I’m downgrading the BTCO is quite simple. After nine months since the inception of all major spot BTC ETFs, more liquid and cheaper options have established their place in the ETF space. Given that all spot BTC ETFs trade the same asset, it’s the liquidity and fees that matter. The BTCO ETF isn’t a bad ETF to hold, it’s just worse than the current competition, and I think investors should stick to the best options available.

Source: Seeking Alpha