The hidden costs of the new Bitcoin ETF

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…


Read our privacy policy for info.

Follow on LinkedIn

Click here to follow Gontran de Quillacq

If already following, go to LinkedIn profile

Written by Gontran de Quillacq

Gontran de Quillacq is an expert witness and a legal consultant. He is a recognized authority in options, trading, derivatives, structured products, portfolio management, hedge funds, mathematical finance, quantitative investment, strategy research and financial markets in general.


Submit a Comment

Your email address will not be published. Required fields are marked *

You May Also Like…

Turkey’s fall

Turkey’s fall

The Turkish Lira is free falling. It has been weakening for years (from parity to 12 TRY to the dollar), but the 15% fall on Tuesday is causing a lot of pain and concerns. It could be intentional.

read more

Pin It on Pinterest