Summary Prefer holding Bitcoin directly or via competitors' ETFs over ProShares Bitcoin ETF due to lower fees and better tracking of Bitcoin prices. Bullish on Bitcoin with a price target of $125k by March, driven by strong ETF inflows, low exchange reserves, and potential regulatory support. Mt. Gox repayments and MicroStrategy's aggressive buying strategy are unlikely to disrupt the current bullish trend significantly. Key risks include potential market downturns in early 2025 and increased supply from miners if Bitcoin prices drop. The ProShares Bitcoin ETF ( BITO ) holds futures instead of spot Bitcoin. For now, I prefer various competitors that hold Bitcoin. Probably the best thing, if you can manage, is to hold your Bitcoins through a hardware wallet. ProShares charges 0.95% on an annualized basis. The fund also distributes some gains, which can make it a bit tedious to keep your exposure up. On the other hand, you're automatically selling some over time. Futures also tend to suffer from roll-yield. This is one reason why it doesn't track the Bitcoin price perfectly: BITO lags bitcoin price (Seeking Alpha) The fees on U.S. traded Bitcoin ETF's tend to be lower: BITO GBTC IBIT ARKB BITB BTC Fund Name ProShares Bitcoin ETF Grayscale Bitcoin Trust ETF iShares Bitcoin Trust ETF ARK 21Shares Bitcoin ETF Bitwise Bitcoin ETF Grayscale Bitcoin Mini Trust ETF Fund Type Alternative Alternative Alternative Alternative Alternative Alternative Issuer ProShares Grayscale iShares 21Shares US LLC Bitwise Investments Grayscale Inception 10/18/2021 09/25/2013 01/05/2024 01/10/2024 01/10/2024 07/31/2024 Expense Ratio 0.95% 1.50% 0.12% 0.21% 0.20% 0.15% AUM $2.60B $21.15B $53.00B $4.85B $4.07B $3.90B Only the Grayscale Bitcoin Trust ( GBTC ) is a more expensive way to get exposure. However, there can be advantages to going through futures. Some cryptocurrencies have a yield. That's currently not the case with Bitcoin. Ethereum ( ETH-USD ) is a well-known example. In Europe, there are a lot of cryptocurrency products that pass along (part of) that yield. In the U.S. that's not the case. For most U.S. investors, it is hard to get access to those products. However, professional global traders can buy these (collect yield) and offset the crypto exposure by selling futures. These kinds of arbitrage trades can then have an effect on the futures curve and implicitly pass on some of the yield. However, I'd still rather pick and choose which futures to buy but wanted to mention it. In any case, I think the details of BITO vs any of these other products are overshadowed by the consideration of whether you want Bitcoin exposure or not. The volatility level is so high that these, often important, issues take a bit of a back seat. Mt. Gox On Bitcoin, I remain bullish. In my most recent article about Bitcoin, I set a price target of $88k for the end of the year. That's been exceeded now, and I'll move the goalpost in the conclusion. There are several reasons I'm not too worried $100k Bitcoin marks the top yet. I've commented on the Mt. Gox repayment saga quite a few times in the past. Some money has been repaid. Creditors got to choose whether they wanted to be repaid asap or were okay with a bit of an outdrawn procedure. The reason for that being there always remain small issues to be resolved, and it isn't great if that's holding up the entire process. Of course, the creditors picking the early option gave up some of the ultimate theoretical economics. The holdouts should ultimately be slightly better off but get to endure. The rehabilitation trustee posted the following English doc laying out the reasons. In practice, at the time of posting, there was still 44,905 BTC that needed to be sent out, and the deadline was moved to October 31, 2025, due to a variety of reasons like having to find the right people, legal dispute, etc. Here's a quote: With the exception of certain types of repayments, the Rehabilitation Trustee has largely completed the Base Repayment, Early Lump-Sum Repayment, and Intermediate Repayment (collectively, the "Repayments") for rehabilitation creditors who have completed the necessary procedures for receiving repayments and have not encountered any issues during the Repayments process. However, many rehabilitation creditors still have not received their Repayments because they have not completed the necessary procedures for receiving Repayments. Additionally, a considerable number of rehabilitation creditors have not received their Repayments due to various reasons, such as issues arising during the Repayments process. This just makes for a more gradual release of this BTC. Given we're in a bull market for Bitcoin, I'm not too worried about this additional supply because holders will be more inclined to continue hodling, the market is able to absorb any selling better, and the repayments likely continue throughout the year as issues get solved. Inflows Inflows into Bitcoin ETFs are strong. Inflows are at levels similar to when ETFs were launched. The difference being this time there are virtual no offsetting outflows from the Grayscale Bitcoin Trust (GBTC). At the time, investors were migrating from this higher fee product to the newly available and cheaper alternatives. In other words; there is a lot of interest currently. spot bitcoin flows (THE BLOCK) Exchange reserves Because exchange reserves have hit a multi-year low and are trending down hard since April I wanted to highlight this: Exchange reserve assets (Crypto Quant) Elevated (and especially rising) exchange reserves can indicate future selling. If you want your Bitcoin to be secure, you don't have it on an exchange. The reason it is moved there is for trading purposes (which means selling). With Bitcoin, this can be tracked because blockchain movement can be followed. The inverse (dollars getting moved there) can't be tracked in the same way. Trump's election In this article , I wrote: Personally, I expected Bitcoin to benefit from either election outcome. If only because the uncertainty of the election would end. I'm bullish on Bitcoin for other reasons as well, more deeply explored in this article . Q4 tends to be a very good quarter for Bitcoin (since 2016) and November specifically (an average of +50% and +30% results according to Tastylive ). For good measure, Trump wasn't as pro-Bitcoin during his previous run. In my view, the pre-market run will likely continue. I severely underestimated how excited the crypto community responded to a Trump victory. I still mentioned and expected Bitcoin and crypto companies to do well in the article mentioned but not to the extent it has. It is impossible to prove, as there are no counterfactuals, but I expected Bitcoin and the market to rise with a Kamala win as well. Anything was simply an improvement from the status-quo under Biden. Most interestingly, Trump has indicated he likes the idea of establishing a national Bitcoin reserve. It's an idea that's been worked on by Senator Cynthia Lummis, who advocates for the government to buy 1 million Bitcoins over 5 years. At most there will be 21 million of these things out there, so that's a considerable amount. If this idea gets implemented, I'd expect the outcome to be staggering, but it's not my base case. Just a more positive regulatory environment should have a positive effect, if nothing else, on the capital raising for crypto-associated companies. MicroStrategy I've been writing on Seeking Alpha about Bitcoin since 2016. Almost always favorably, as I think there's real merit to this interesting novel asset with all its widely discussed properties. I'm not a huge fan of certain derivatives of Bitcoin, like MicroStrategy (MSTR). I'd only touch something like that if you knew exactly what you were doing. But as I discussed here in more detail, MicroStrategy can have a large effect on Bitcoin's price. Since my last Bitcoin article, MicroStrategy has announced an astounding $42 billion plan to raise capital . Saylor is generally very upfront about what he will do with raised capital; buy Bitcoin. Historically, MicroStrategy follows this up with another capital raise if the price continues to rise. It will play defense if/when prices fall. Only part of the capital raising has happened, and it is likely designed to get some headlines, but it's an aggressive buyer who's waking up after being absent for a while. Risks The current key risks to me are that we've moved past November, which is a very good month for Bitcoin, and are moving towards early 2025. Especially, January can be a tough month. Perhaps with some of the buzz generated during the holidays slowing down. I've written often about the halving of 2024 and what it could potentially mean because miners bring less supply to market. However, when Bitcoin is rallying, crypto firms like MicroStrategy, but also the miners get to raise money at much more favorable terms. They tend to pounce on these opportunities: capital raising by miners (TheMinerMag) When this money gets converted into crypto-mining hardware, that results in more and more supply coming to market. When demand flags, the additional supply can start having an effect. Bitcoin prices go down, decreasing revenue miners are generating, causing them to sell more of their Bitcoin production and/or reserves. Conclusion I'm still quite bullish in the short term and the very long term. I'll likely get a bit more careful around Q1 2025. I'd strongly reconsider exposure if we move to $70k. This would be a clear change from the current bullish trend. Depending on the events driving such a drop, I'd either sit or potentially buy back in later. As for the upside, based on seasonal Bitcoin performance data, I think we could see Bitcoin $125k before the end of March. In my previous article I arrived at a price target of $88k primarily based on historical seasonal Bitcoin returns. Updating that number with seasonality return data up to March, starting from today's price, I get to $125k. Keep in mind that's just a possible target, and I'm more confident near-term prospects remain fine as with any exact target being achieved. For example, with the right tweets from a fresh President, higher prices are possible. Given all of the above, BITO and other Bitcoin funds remain a buy.
