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By Gontran de Quillacq
On October 20, 2021

The hidden costs of the new Bitcoin ETF

Heavy demand for the first bitcoin ETF, which was listed yesterday. But be wary of hidden costs. BITO is an expensive ETF to carry.

BITO-ListingHeavy demand for the first bitcoin ETF, which was listed yesterday.

With $700m of trading volume, BITO attracted way more interest than the first S&P 500 ETF on its first day.


But be wary of hidden costs!

  • The expense ratio (management fee) of 0.95%. That level would not be that high for esoteric assets, BUT the fund is not trading any esoteric asset. It is investing in CME-listed futures. So it is a high-margin product for the issuer.
  • More importantly, because the fund invests in futures, not in cash, it is exposed to the futures’s repo (aka the rolling cost). The repo trades around 17% right now. The fund will lose 15-20% per year in rolling costs! That makes it a VERY expensive vehicle.
  • It will place its cash in T-Bills (<1Y), aka earn virtually no interest, but that’s standard these days.
  • Its tax efficiency is still imprecise, and they could pass through to you. You may end up with tax bills as a shareholder.

Oh, did I forget this? There is some imprecision on the long-term value of its asset and you should expect some volatility…


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