The CEO of Compound Capital Advisors, Charlie Bilello, has observed that Bitcoin futures Exchange Traded Funds perform worse than the spot traded token. He noted that while the cryptocurrency was down nearly 10%, the futures ETF dropped by almost 20%. The Compound executive posts a chart on Twitter comparing the performance of the two products against the United States Dollar.
Flaws In Biello’s Calculation
Bloomberg ETF analyst Eric Balchunas has since responded to Charlie Bilello, pointing out flaws in his computations. Balchunas, as well as several other parties, responded to Bilello’s tweet, letting him know that the fund is trailed by 2.5% at monthly intervals. Charles Biello had previously disclosed in his tweet that the Bitcoin futures ETF had the record for the fastest such product to raise a billion dollars. He identifies the market condition he observes as a Contango.
Contango explains why a difference exists between a spot trading performance and an ETF performance. The term ‘contango’ refers to a situation where the price of an asset’s futures is higher than that of the traded asset itself. The discrepancy of prices in the market forces ETFs supported by futures instead of the spot commodity to finish contracts at a greater price at the end of the month. ETF investors remain required to pay a monthly premium of about 2%.
Bitcoin ETFs Progress Thus Far
About 3 Bitcoin ETFs have launched in the United States in recent months. ProShare was the first of these, followed by the Valkyrie’s Bitcoin Funds ETF, which launched days later; recently, VanEck ETF joined the fray. ProShare has received the most support from any of the three active ETFs. The ETF gained SEC approval on the 18th of October.
In just over a month, the ETF was estimated to have about $1.4 billion in assets under management. The fund also set the record as the only ETF to attain a billion dollars in a day. The assets under management of the ProShare ETF remain leagues ahead of the competition. Many have attributed this success to the fact that they broke into space first.
The Valkyrie Bitcoin futures ETF launched in October also. The Valkyrie future ETF in a month amassed a meager $57 million in a month. The VanEck ETF, on the other hand, is currently the least performing of the lot, with assets of $9 million. The head of ETF and mutual fund research at CFRA Research, Todd Rosenbluth, said that it is not easy to gain massive acceptance when others have already made their presence known in the market. At the moment, spot Bitcoin ETFs are pushing for approval from the SEC.