Contents
Arman Shirinyan
Bitcoin ETFs once again underperform compared to actual spot pair
According to the CEO of Compound Capital Advisors, Charlie Bilello, Bitcoin futures ETFs are drastically underperforming compared to the spot Bitcoin while being down 19% against the spot’s 9%.
On the provided “Returns since inception” chart, two lines reflect the performance of ProShares ETF and the spot Bitcoin trading pair against the U.S. dollar. While two lines move in a complete correlation, the outcome of an investment made in the two assets would highly differ.
Inaccurate calculations
While the CEO of Compound criticized the performance of the futures-backed ETF, Bloomberg ETF analyst Eric Balchunas pointed out the inaccuracy of the data provided. Balchunas said in his tweet that the fund is trailed by 2.5% monthly, 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 (@charliebilello) December 5, 2021
According to services like Yahoo Finance, the fund in fact trades at approximately a 2% premium compared to the spot asset instead of 10% from data provided by Compound CEO Bilello.
Contango
The difference between spot performance and the ETF is explained by the contango, which is a condition in which the price of an underlying asset trades at a discount compared to the price of the same asset’s futures.
With such a difference appearing on the market, exchange-traded funds that are backed with futures instead of an actual spot asset have no other choice but to conclude a new contract for a higher price at the end of each month. The usual premium for ETF investors stays at around 1-2% monthly.
While the futures-backed ETF by ProShares has set the record for one of the largest inflows to the fund in the first days of trading, its performance was far from optimal.