Slump in crypto ETF's share price cements it as sixth worst-performing debut ETF ever of its kind
The world's first exchange traded fund that tracks the price of bitcoin has lost more investor money one year after its record-breaking debut than any other ETF.
In October 2021, asset management firm ProShares introduced its Bitcoin Strategy fund, which quickly became the most lucrative new ETF in history after accumulating more than US$1 billion in its first week of trading on the New York Stock Exchange.
The debut of bitcoin, according to proponents, marked the beginning of cryptocurrency's integration into the largest equities market in the world and into common investment plans for both individual and institutional customers.
However, data from Morningstar Direct for the Financial Times shows that after one year of operation, the fund has suffered a massive loss of assets.
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In a test for investors during what has come to be known as the "crypto winter," its 70% share price collapse also makes this the sixth-worst performing launch ETF of its kind all time.
Chief ratings officer at Morningstar Research Services, Jeffrey Ptak, told the Financial Times: “We’ve seen funds nosedive right out of the gate in this manner, but rarely do they attract so much in assets so soon after launching like [this] did.”
Over the course of its existence, the ETF known as BITO has constantly garnered inflows with only modest outflows. The assets of the fund currently stand at US$624 million, despite net inflows of US$1.8 billion in its first year.
Morningstar estimates that BITO has lost US$1.2 billion in investor capital – making it by far the greatest debut loser – due to the timing of inflows and the 70% decline in the fund's equity price.
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Although they were all much smaller, other crypto ETFs also had steeper percentage declines in their first year.
The first US equity fund was introduced in 1993, followed by the first fixed income fund in 2002, and the first gold fund in 2004. ProShares chief executive Michael Sapir stated the launch of BITO was a milestone for the US$8.4tn ETF sector at the time.
The highly anticipated introduction of BITO assisted in driving the price of bitcoin from US$63,000 on launch day to all-time highs just shy of US$70,000.
Jeff Dorman, chief investment officer at asset management firm Arca, said that “Bitcoin . . . has completely lost its narrative — it is not an inflation hedge, it is not uncorrelated [to other assets] and it does not act defensively”.
