The Cryptocurrency Market Revival
Following a period of significant decline from the highs of 2021, cryptocurrency investors have witnessed a remarkable turnaround. Over the past 15 months, Bitcoin (BTCUSD) prices have nearly tripled, while Ethereum (ETHUSD) has surged over 100%. The recent resurgence of the Bitcoin bull run can be attributed to various factors such as the launch of multiple spot Bitcoin exchange-traded funds (ETFs) and the imminent BTC halving event.
Although investing in cryptocurrencies can offer substantial rewards, it also comes with inherent risks. With over 20,000 cryptocurrencies in circulation, only a select few are poised to deliver substantial gains in the coming years. Additionally, investors should brace themselves for periodic drawdowns exceeding 80%.
The Emergence of Bitcoin ETFs
While several spot Bitcoin ETFs have recently debuted, futures-backed ETFs have been available since late 2021. Notably, some of these crypto-backed ETFs provide investors with dividends, making them an attractive option for those seeking a passive income stream.
Bitcoin and Passive Income
Bitcoin futures ETFs, akin to spot BTC funds, seek to closely track BTC prices. However, the distinction lies in holding Bitcoin futures contracts, which come with expiration dates. As these contracts near expiration, they must be settled through cash or BTC delivery.
Given that funds roll over contracts to later dates as they approach expiry, a scenario where BTC prices rise leads to profitable outcomes. Funds can then choose to pass on profits to shareholders or allocate them to taxes.
Consequently, several Bitcoin futures funds now distribute profits to shareholders in the form of dividends, resulting in enhanced yields. Investing in these funds is anchored on the belief that BTC prices will continue their upward trajectory.
With this perspective, here are three Bitcoin ETFs that present an opportunity for passive income.
1. ProShares Bitcoin Strategy ETF (BITO)
With assets under management totaling $2.16 billion, the ProShares Bitcoin Strategy ETF (BITO) boasts a yield exceeding 13%, supported by an annual dividend payout of $3.31. The ETF’s expense ratio stands at 0.95%, making it a relatively affordable option.
Utilizing near-term BTC futures as its foundation, BITO has gained 62% over the past 52 weeks. Adjusting for dividends, the total returns climb closer to 96.7%.
2. Simplify Bitcoin Strategy PLUS Income ETF (MAXI)
Managing assets worth $1.1 billion, the Simplify Bitcoin Strategy PLUS Income ETF (MAXI) offers a yield of 24.89%, driven by an annual dividend rate of $5.83. With an expense ratio of 0.97%, MAXI falls on the slightly pricier end.
In addition to exposure to BTC futures, MAXI generates supplemental income through the sale of short-dated put and call spreads across various assets. The ETF has seen a 53.6% increase in the past year, translating to total returns around 102.9% after factoring in dividends.
3. Valkyrie Bitcoin and Ether Strategy ETF (BTF)
The Valkyrie Bitcoin and Ether Strategy ETF (BTF) manages over $43.9 million in total assets and delivered a dividend of $2.14 per share to shareholders over the past year, indicating a forward yield of 12.6%.
BTF not only offers exposure to short-term BTC futures but also encompasses short-term Ethereum futures. In the previous 12 months, the ETF has yielded a 75% return to shareholders, or around 104.7% after adjusting for dividends.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
