"ProShares Ultra Bitcoin ETF (NYSEARCA:BITU) promises double the daily move of Bitcoin, and right now that means double the chaos. The fund collapsed through January and early February, with 44% losses over the past month as Bitcoin's selloff accelerated. This decline was roughly twice the magnitude of the underlying Grayscale Bitcoin Mini Trust ETF (NYSEARCA:GBTC), which fell 23% in the same period, illustrating the core risk: BITU magnifies both gains and losses through its 2x leverage structure."
"It achieves 2x exposure through regulated Bitcoin futures contracts, not direct coin ownership. That structure matters because futures carry roll costs and tracking error during extreme volatility. Bitcoin's recent crash from its late January peak created a cascading effect for leveraged holders. The magnitude of this decline translated to catastrophic losses for BITU holders who experienced the move at double intensity. This reveals why the futures-based structure amplifies risk during liquidation cascades, as each percentage point of Bitcoin's decline hits twice as hard."
ProShares Ultra Bitcoin ETF (BITU) targets twice the daily return of Bitcoin using regulated Bitcoin futures rather than direct coin ownership. The fund launched April 1, 2024 and holds about $538 million in assets. BITU recorded a roughly 44% decline over the past month, about double the 23% drop in the Grayscale Bitcoin Mini Trust (GBTC). Futures-based exposure introduces roll costs and tracking error, which widen during extreme volatility. Leveraged liquidations drove the broader Bitcoin selloff, with Hong Kong hedge funds' positions contributing to forced selling. Roughly $2 billion in leveraged positions were liquidated in a single day. Rising futures open interest with negative funding rates signals persistent leverage-induced downside risk.
Read at 24/7 Wall St.
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