BITO: An Income Generating Machine

Summary ProShares Bitcoin Strategy ETF (BITO) offers consistent income by investing in Bitcoin futures, without the upside cap of covered call ETFs. BITO's performance closely tracks Bitcoin, with minimal NAV erosion, making it resilient to price downturns and quick to recover alongside ￰0￱ should focus on income generation, not growth, when holding BITO, and avoid panic selling during temporary price ￰1￱ is ideal for those confident in Bitcoin's long-term growth, but new investors should start small and understand its income-focused ￰2￱ Bitcoin Strategy ETF ( BITO ) has the primary goal of generating income from exposure to Bitcoin futures contracts and/or swap ￰3￱ two combine to provide generous income results on a consistent basis, with most of that coming from futures ￰4￱ of BITO (Proshares) Contrary to pure covered call ETFs, BITO doesn't have the same type of cap on the upside as they do, so it has more potential to quickly recover from downturns after a correction associated with Bitcoin's price ￰5￱ the ETF focuses on generating income, investors need to have a certain mindset if taking a ￰6￱ have to fight off the inclination to look at growth to determine the success of the investment vehicle, rather than looking at income and total return as the metric of ￰7￱ this article we'll look at the performance of BITO against Bitcoin, NAV performance, and why, based upon performance, taking a temporary hit to the downside shouldn't trigger selling based upon fear, ￰8￱ mindset needed to be successful if investing in ￰9￱ goes Bitcoin, so goes BITO Being an indirect play on Bitcoin, it's obvious that how Bitcoin performs, so will BITO ￰10￱ means there will be volatility, including swings on both sides of the ￰11￱ said, the share price of the ETF has moved very close in conjunction with the price of ￰12￱ has been a slight increase in separation between the two, but the pattern remains in place, meaning NAV hasn't suffered much erosion, if ￰13￱ readers, NAV erosion isn't when the price of the ETF drops in relationship to Bitcoin; that's not what NAV erosion ￰14￱ NAV erosion is when an ETF like BITO pays out more than the income it ￰15￱ far, that hasn't been the case with BITO, and that's why even after significant downturns in the price of Bitcoin, it can recover ￰16￱ example, I've had times when I've been down over $800 with BITO, and yet a few days later can be near or in the green once again.

That's why I really don't pay any attention to the decline in share price. I'm in it for income and am totally convinced, over the long haul, the price of Bitcoin will continue to rise, with a lot of upsides left in it in the years ￰17￱ the price of Bitcoin and BITO drop, that can result in lower distributions, but again, my experience is that share price and distributions recover when Bitcoin recovers. So, when evaluating this ETF, be sure to differentiate between price movements based upon the price movement of Bitcoin, and not to confuse that with NAV erosion coming from failure to meet income goals in any one ￰18￱ with high yielders like BITO There is a certain mindset needed when investing in this type of ￰19￱ mentioned earlier, there must be a separation in the mind concerning growth and income if investing for ￰20￱ me, I don't care if there is growth or not with BITO, because my sole reason for taking a position is to generate consistent income over a prolonged period of ￰21￱ so, I have complete confidence that BITO will growth both in the years ahead, and over time should be a very strong ￰22￱ doesn't mean I'll never take some profits off the table when I think it's reached a temporary high that could result in a correction that may last awhile.

I will never sell the bulk of my holdings, but if there are other opportunities to invest in at the time, I may sell off a small portion of my holdings, bearing in mind that it's only a small part of my overall income-generating ￰23￱ of the things I see all the time is investors not being able to overcome the obvious idea that this is not primarily a growth ETF. Yet, there appears to be more investors evaluating BITO and other high-yielding ETFs as if they are to be measured by growth rather than ￰24￱ you're serious about taking a position in BITO and similar ETFS, the mindset must be to value it for income first, and growth, if ever, ￰25￱ reason that's important is because if not clear on our goals and strategy, we'll be tempted to sell at a loss.

Remember, an unrealized loss isn't a loss, and in the case of BITO, you can see from the chart below (green is Bitcoin and orange BITO) that it recovers over and over ￰26￱ price movement measured against BTC (Seeking Alpha) Conclusion If we understand and believe Bitcoin has a strong future growth period ahead of us, then BITO is an excellent way to play ￰27￱ you aren't convinced about Bitcoin's growth trajectory, I wouldn't take a position in BITO because you'll be tempted to sell when you get a little nervous from the drop in share price. I've held BITO for a while now, and it has had wide swings in its share price and yet continues to pay out nice distributions every ￰28￱ distributions vary from month-to-month, but they are never insignificant and are one of my top income performers.

High-yielding ETFs like BITO are relatively new to the market, with most being under two years ￰29￱ that reason, many investors aren't too familiar with them, or no nothing about them at ￰30￱ those that fall in that category, it would be best in my opinion to do a deeper dive into ￰31￱ its purpose and how to determine actual NAV erosion, which is not the share price moving up or down in conjunction with the price of Bitcoin, as mentioned ￰32￱ is crucial because a number of investors panic because they enter into BITO wide-eyed because of the high ￰33￱ when the share price temporarily takes a hit, they exit their position with a loss, only to find a short time later the ETF has recovered nicely and is still throwing off solid ￰34￱ thing I recommend is taking small position in the ETF; maybe as low as two or three shares.

I have discovered that if you have a little skin in the game, you're more likely to do your homework, even if it represents a small amount of money. I did this when I first started investing in high yield ETFS and found out I did my homework when I had a stake in an ETF, rather than ending up with not much interest because there was nothing at stake.