Bitcoin at $66,800 Makes BITO Look Awfully Tempting

"BITO is down 21.4% year-to-date as of February 25, directly tracking a sharp Bitcoin selloff that erased a significant portion of BTC's value in a matter of weeks. Bitcoin has since stabilized near $66,800, and BITO has bounced 4.3% over the past week, but the recovery has been tentative and sentiment remains cautious."

"The fund carries a 0.95% expense ratio, compared to roughly 0.25% for most spot competitors. Since spot Bitcoin ETFs from BlackRock, Fidelity, and others arrived in January 2024, BITO has faced persistent AUM outflows to lower-cost alternatives."

"Polymarket assigns a 38.5% probability to Bitcoin reaching $100,000 by year-end - a bullish scenario that would meaningfully lift BITO. Yet the same crowd sees a 76% implied probability of Bitcoin revisiting $55,000 at some point, reflecting how much downside risk remains priced in."

ProShares Bitcoin Strategy ETF (BITO) provides Bitcoin exposure through CME futures contracts rather than direct Bitcoin holdings. While innovative at launch in October 2021, this structure became disadvantageous after spot Bitcoin ETFs from BlackRock and Fidelity arrived in January 2024. BITO's 0.95% expense ratio substantially exceeds competitors' 0.25%, driving outflows. The fund declined 21.4% year-to-date through February 25, tracking Bitcoin's sharp selloff. Bitcoin stabilized near $66,800 with BITO recovering 4.3% weekly, though sentiment remains cautious. Institutional risk appetite and U.S. regulatory environment represent primary macro drivers. Despite crypto-friendly administration support, elevated VIX levels at 19.55 signal market fear pressuring risk assets. Prediction markets show 38.5% probability of Bitcoin reaching $100,000 by year-end, but 76% probability of revisiting $55,000, indicating substantial downside risk.

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