Summary ProShares Bitcoin ETF offers bitcoin exposure via CME futures, not direct BTC, with a 0.95% management fee and inherent roll friction. BITO tracks bitcoin directionally in bullish, high-liquidity environments, but may underperform spot BTC during sideways or corrective phases due to futures contango. Liquidity indicators and cycle regime bands suggest the current environment remains bullish, supporting tactical exposure to BITO despite recent all-time highs. Recommend buying BITO as a tactical position, staggering entries and accepting potential pullbacks, given strong liquidity and positive trend signals. Introduction ProShares Bitcoin ETF (BITO) offers exposure to bitcoin in a familiar package for the average stock market investor. The stated objective of this ETF is that its return, before commissions and expenses, corresponds to the performance of bitcoin, but it does not purchase or hold BTC. Exposure is provided through derivatives, primarily bitcoin futures traded on CFTC-registered markets, and swaps as support when the management team deems it necessary. It is an actively managed fund with an annual management fee of 0.95%. The main dynamics of the fund are easy to understand. The ETF buys front-month futures (those with the nearest expiry date) and, as they approach expiry, rolls the position by selling the expiring contract and buying the next one to maintain that exposure on a continuous basis. This operation is explicitly described in the prospectus and is the reason why BITO resembles the spot market, but does not clone it. There are two reasons for this: on the one hand, futures can be traded at a premium or discount to the spot price, and, on the other hand, the roll adds or subtracts yield depending on the shape of the curve (contango and backwardation). In contango, the fund tends to sell cheaply and buy back more expensively when moving to the next expiry date, which erodes part of the return; in backwardation, the opposite happens, and the roll can add to the return. As mentioned in the first paragraph, BITO does not invest directly in bitcoin, and the fund's own document notes that it should not be expected to match the spot price. In periods of clear trends, the correlation between futures and spot prices is usually high, but in sideways movements or persistent contango, differences can become apparent. In addition to the basis between futures and spot prices, transaction costs, possible position limits, and liquidity conditions in the derivatives market all come into play, all of which can cause the ETF's performance to diverge from that of bitcoin. The fund's cash portfolio is normally invested in US Treasury bills (T-Bills) and very short-term repos; the fund may also use reverse repos from time to time as a form of financing. This collateral provides an additional return that is significant and helps to offset, in part, the potential friction of rolling in contango phases. On a day-to-day basis, BITO seeks cash-settled futures (no delivery of BTC), referenced to official CME indices, and completes the exposure with swaps if at any time it cannot achieve the desired weight in futures. This architecture allows the management team to maintain the bitcoin beta within a standard securities account, with intraday liquidity and without going through crypto custodians or wallets. In return, the investor assumes a cost structure that differs from a traditional equity or bond ETF and a tracking dynamic conditioned by the futures curve. Analysis - Fundamental In this section, we will analyse some cryptoeconomic indicators in detail to try to offer the reader an accurate perspective and a sound recommendation on the vehicle in question. Node Analytica The first proposed panel shows a proprietary indicator that directly influences the movement of risk assets: the amount of liquidity flowing through the financial system, aggregated at the global level and, in parallel, the pulse of net liquidity in the US. Both are normalised on a 0–100 scale to distinguish between expansionary and contractionary phases. Rather than the specific level, the determining factor is the slope of the indicator, which means that when the line rises and remains above its midpoint, financial conditions ease, credit flows more freely, and risk appetite improves. When it loses slope and begins to decline, ceilings begin to form and the upward trend loses momentum. Within this framework, bitcoin's historic high of £126k in early October fits with an environment of still ample liquidity and no clear bearish turn. As long as liquidity does not fall in a sustained manner, the bullish cycle of liquidity-sensitive assets (including bitcoin) tends to continue over time. Translated to BITO (exposure to bitcoin via CME futures), this context becomes practical. In phases of rising liquidity or high plateaus, directionality prevails and the friction inherent to the vehicle (the commission and, above all, the roll of futures (selling the expiring contract and buying the next one)) tends to take a back seat. On the other hand, if GLI and US Net Liquidity turn downward and that decline continues for several weeks, the bitcoin market tends to enter sideways or corrective phases; there, contango (futures more expensive than spot) can transform the roll into an adverse market situation, which erodes part of BITO's performance relative to the price of BTC. For a retail investor, this metric has two natural uses: it serves as a trend filter (bullish as long as the slope does not turn negative) and as a divergence radar (if bitcoin hits highs and liquidity hits decreasing highs, the risk of cycle exhaustion increases). With liquidity still ‘generous’, the narrative of rising highs remains intact until the turning point arrives, when the slope turns clearly negative. Node Analytica Secondly, we have the colour band indicator, which acts as a simple map of regimes in Bitcoin, where warm tones (green-yellow-orange-red) usually accompany trend accelerations, while the transition from red to blue has preceded losses of momentum and phases of decline or consolidation in previous cycles. This indicator does not attempt to predict the next price movement, but rather to show the reader what phase of the cycle the asset is in. In the current environment (with a more mature market, greater institutional weight and more lasting liquidity than in 2017 and 2021), it is reasonable to think that the expansion phases will be longer and that, when corrections do occur, they will more often take the form of ‘time corrections’ (time-consuming sideways movement) than vertical crashes, without eliminating the risk of significant setbacks typical of such a historically volatile asset. For this ETF, these bands are a tactical trigger that completes the liquidity reading. As long as the panel remains in the warm zone and liquidity indicators do not show a sustained decline, it is reasonable to let the trend run, assuming that roll friction is there but weighs less when price momentum is strong. In this context, the ETF tends to move very much in line with bitcoin because the direction takes precedence over the ‘toll’ of renewing the futures in its portfolio. If the panel turns blue and, at the same time, liquidity loses momentum, the balance between risk and return worsens. In these phases, bitcoin tends to enter distribution or correction, and the futures curve usually moves into contango (the next expiry is priced slightly higher), which makes the negative roll yield more visible: each renewal involves selling the expiring contract and buying a slightly more expensive one, and that difference reduces the yield compared to the spot price. The current environment remains bullish, but it is worth keeping an eye on these two points because when they appear, they will mark the change in phase that really matters in a futures ETF such as BITO. ETFs Comparison Fund Investments Expense Ratio ProShares BITO CME Futures Bitcoin + TBills 0,95% VanEck XBTF CME Futures + Swaps 0,76% CoinShares BTF CME Futures Bitcoin & Ether + TBills 1,25% Global X BITS Futures Bitcoin + Blockchain Company Shares 0,65% Bitwise BITC Futures Bitcon - Trendwise roll 0,90% In the league of derivatives-based bitcoin ETFs, BITO is the ‘workhorse’ for simplicity and liquidity, with an active structure that uses CME futures and swaps and an expense ratio of 0.95%. In contrast, VanEck's XBTF offers similar exposure to futures at a lower cost (0.76%), although it tends to move less volume. CoinShares' BTF (formerly Valkyrie) expands the universe to bitcoin and ether futures, which comes at a higher TER (1.25%). Global X's BITS mixes BTC futures with shares in the blockchain ecosystem, which dilutes the ‘pure’ beta of bitcoin but keeps fees at 0.65%; and Bitwise's BITC stands out for its approach of rotating between BTC futures and Treasury bonds based on trends and for its policy of optimising the roll, with a net expense ratio of 0.90% and a time limit that caps it at 0.85% until May 2027. Conclusion After this analysis and with the current data in hand, my current recommendation is to buy, even though we are at historic highs. With global liquidity and net liquidity in the US still high and the cycle map still in a warm phase, the bias remains bullish and favours letting the trend work in our favour. In this context, BITO, despite its inherent futures friction and 0.95 commission, tends to follow the directional movement of Bitcoin well. Entry makes more sense as a tactical position, staggering purchases and accepting the possibility of pullbacks after the recent all-time high. 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