YBTC Vs. YBIT: Wrong Bitcoin Call, Diverging Outcomes

Summary YieldMax Bitcoin Option Income Strategy ETF (YBIT) is downgraded to Sell due to unreliable drawdown mitigation and declining investor interest post-Bitcoin crash. Roundhill Bitcoin Covered Call Strategy ETF (YBTC) is now rated Hold; it outperforms YBIT in both drawdown mitigation and upside capture but lags spot Bitcoin for total return. YBIT's failure to defend against downside and its lackluster upside capture undermine its use case, especially after a ~40% Bitcoin correction. YBTC remains relevant for income-focused investors, offering better downside protection and income generation in flat or declining markets, but is less compelling for total return. In May last year, I had issued a Buy rating for both the YieldMax Bitcoin Option Income Strategy ETF ( YBIT ) and the Roundhill Bitcoin Covered Call Strategy ETF ( YBTC ). The use cases were different but both looked good as an income tool, especially with a bullish thesis on the underlying at that point. That bullish Bitcoin-led thesis was further reiterated in another article I wrote on YBIT in October last year. Since the October thesis, Bitcoin has corrected by almost 40%, severely crippling the income plays and proving me wrong in more ways than one. First the crash in Bitcoin was a core break for the thesis. Then, we did not see the expected defense I had projected YBIT for either. YBIT has since suffered from a lack of investor interest too, potentially because of several popular YieldMax products eventually going for reverse splits, indicating NAV damage. The ratio of AUM to share prices below clearly shows YBTC still retains a lot of investor interest even after the Bitcoin crash, while YBIT's interest is declining sharply. That has more to do with the YieldMax franchise losing a lot of interest in the interim rather than performance alone. Because if you see the total return charts from May last year to now, there is hardly anything to choose between YBTC and YBIT. Data by YCharts Data by YCharts In this thesis, I aim to address a few issues in my earlier analysis and derive the way forward after mistakes made at the peak of the Bitcoin bull cycle. I argue for the case of how the odds and magnitude of a further crash in the underlying (i.e. Bitcoin) are lower than that of rebound. I show why both YBTC and YBIT both are therefore not the instruments to position oneself for that scenario. I also discuss how YBIT's thesis is indeed looking less defensible today after the expected drawdown mitigation did not show up in the falling markets - hence a double downgrade to a Sell (but not because of NAV erosion alone). YBTC is better poised for the current environment both as a total return vehicle and an income instrument. But even YBTC becomes a Hold - because the use case is diminished for total return investors, although it becomes stronger for income investors at current levels. The Bitcoin Thesis and Odds The core reason why I was bullish on YBTC and YBIT both was because I was bullish on Bitcoin. Even in my October YBIT thesis I was clearly riding the required bull thesis on the underlying asset. At the time, Bitcoin’s bull thesis had strengthened over the past five months, driven by growing institutional recognition and supportive policy developments like the potential Strategic Bitcoin Reserve. Government-linked accumulation and reduced selling pressure from seized assets create a favorable supply-demand dynamic. While volatility was still a factor, structural demand was seen as improving. This supported a long term upward bias. That thesis has not played out at all, at least in the immediate few months thereafter. The result was that YBIT, riding heavily on the bull thesis also collapsed. So, the error was not in gauging the thesis for YBIT here, but in assessing Bitcoin. I had mentioned in my earlier October article that With better drawdown promise and some glitches in an otherwise defined capped upside capture, YBIT becomes inherently reliant on a bull thesis for Bitcoin - the underlying. I had still rated it a Buy because of its potential drawdown mitigation and income abilities. But the core support was a bullish Bitcoin thesis. Another reason, I was comfortable with option-based income strategies at that time was because psychologically they offer some income if Bitcoin crashes or consolidates (from the premiums earned). Option-based strategies do serve a purpose when underlying assets are at high points in the cycle. The fact that Bitcoin has now crashed significantly removes that edge for all option-based strategies, as the odds of a further crash are lower than they were in October last year - much of the leverage and excess positioning has already been unwound. At least from a total returns perspective, the best route when the odds of a rebound exceed that of further corrections, is spot exposure itself, especially knowing fully well that the option-based strategies will cap upside capture, irrespective of how well it is setup for rallies. The case for a Bitcoin rebound is also stronger today because ETF inflows continue to show strong interest despite the sharp pullback. Spot Bitcoin ETF assets have declined from roughly $170b at the peak to about $84b currently - primarily because of the price correction but also due to several months of net outflows. However, cumulative net inflows have only reduced from around $63b to $54b, indicating that most of the selling has come from more recent, momentum-driven allocations rather than a reset in interest levels. This is especially important because the tug of war between equities, crypto and gold has been going through volatile swings with every macro and geopolitical development. As long as inflows do not show a panic drop in interests, I don't see a reason to discard the long term bullish thesis on increasing adoption and supportive legislations. The YBIT Disappointment Beyond the Obvious The drawbacks of the option-based income route are not a new development or realization. I had outlined the very pertinent issues around NAV erosion and inability to compensate upside opportunity losses with drawdown mitigation or sufficient income generation in flat markets in most cases (as mentioned in the "Income Trap" section of a mid-year review of the markets last year). YBIT was still a Buy in my view because there were evidence of decent drawdown mitigation until the ~40% crash happened in late 2025. This is what I had written around the Buy call for YBIT in May: There are equally good Buy cases for YBTC and BTCI as well, but YBIT balances the drawdown mitigation more consistently than the peers. I may prefer YBTC and BTCI because of lower expense fees and performance in certain market conditions - but YBIT does retain a place in the overall Bitcoin based income portfolio. Alongside external factors like a Bitcoin crash, the lack of sufficient drawdown mitigation during this crash makes the only intrinsic edge in YBIT now unreliable. Look at the data from the mid-October 2025 highs to current levels. YBIT has underperformed even YBTC by almost a couple of percentage points. It has been able to save ~4 percentage points of the Bitcoin fall, but given its relatively poorer upside capture abilities, the lack of standout drawdown mitigation makes its position shaky, even within the Bitcoin income portfolio. And that is the primary reason I downgrade YBIT to a Sell today. Not because Bitcoin crashed or because NAV erosion has started to show up in a lot of high-yield option-based income products today. Data by YCharts The Nuanced Use Case for YBTC Now In the YBTC versus YBIT versus spot Bitcoin race, YBTC now easily trumps YBIT both in drawdown mitigation (as now evident empirically) as well as in upside capture (as established in my May thesis). For total return minded investors YBTC does not make a lot of sense today, compared to how it helped enter Bitcoin at the highs in May to October last year. The odds and fears of a drawdown from here being lower (as discussed earlier), spot Bitcoin provides a better total return alternative at this point. I would even do neither and wait for the markets to settle around a multitude of shifting factors (equity markets' valuation and long duration assumption resets, Iran war, crude oil impacts, gold stabilization, rates visibility) before going long even spot Bitcoin today. But if I had to choose one, spot accumulation would make more sense, because however good YBTC's upside capture is, it will lag Bitcoin spot if we see a rally from here. So YBTC is a Hold at best for a total return investor. For income-minded investors though The Buy thesis could be more relevant now because we have a win-win in most scenarios ahead. If Bitcoin corrects further, YBTC saves a few percentage points (far more than YBIT). That generally also means more income in flat market conditions because the option layer is aggressively lined up and reaps significant premiums. And if Bitcoin rebounds, YBTC is expected to track it relatively well. Even with tracking errors, YBTC will be able to fund a lot of the income through capital appreciation from the underlying's strength ( ROC ) . The only relative downside is the opportunity loss in this case. YBTC is overall a decent Hold, relatively speaking. And while I did get the call wrong last year, at least in the case of YBTC it had more to do with getting the Bitcoin call wrong than any intrinsic structural issues. Income investors can even consider accumulating some at this stage.