Choosing the Best Bitcoin Exposure: Evaluating BITO and GBTC

OTC/PINK 1 reply 0 votes 2659 views

As the Bitcoin market shows signs of a potential bullish cycle, it becomes crucial to assess the available options for Bitcoin exposure in brokerage accounts. In this regard, the two primary choices remain GBTC and BITO. Upon revisiting their comparison, it becomes evident that BITO continues to be my preferred option.

Grayscale Investments finds itself locked in a battle with the SEC to transform its GBTC into a spot ETF. Unfortunately, GBTC has been an inadequate proxy for Bitcoin exposure due to its significant discount to the net asset value (NAV). However, GBTC holders, including myself, maintain hope for a conversion that would restore its value.

While I maintain a small investment in GBTC, my focus lies on finding a more reliable proxy for Bitcoin exposure, especially given the recent positive momentum in the Bitcoin market. Technically speaking, Bitcoin has surpassed its wave 4 resistance, opening the doors to a potential target of $125K, a projection I have discussed since 2020.

When comparing BITO and GBTC, concerns about BITO's decay resulting from futures contracts in contango have proven to be less significant than anticipated. The decay has been around 5% over the past year and continues to narrow. Additionally, BITO provides a dividend, currently boosted by higher interest rates, which helps offset the roll decay.

Moreover, implementing a strategy of selling options on BITO has yielded positive results, reducing risk and leading to cost reduction and increased share quantity. It is important to note that successful options trading requires skill and market timing.

From a technical analysis standpoint, BITO's value closely correlates with Bitcoin, suggesting a potential target of $80 if Bitcoin reaches $125K.

The Bitcoin market enters a potential bullish cycle, BITO emerges as the preferred choice for investors seeking Bitcoin exposure in brokerage accounts. Its minimal decay, dividend payment, and correlation with Bitcoin make it an attractive option. While risks associated with futures ETFs should be acknowledged, BITO provides a compelling avenue for investors aiming to participate in Bitcoin's growth.

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