4 Charts on BITO's First Day

The launch of the first bitcoin-tracking exchange-traded fund generated lots of hype. On its first day, it appeared to live up to the hoopla.

ProShares Bitcoin Strategy ETF BITO saw near-record trading volume on day one and hauled in a huge $550 million from investors, one of the largest first-day takes for an ETF on record. In just one day, BITO surpassed all traditional currency-tracking ETFs in size.

This flood of investor interest comes despite words of caution about BITO's inner workings from some cryptocurrency experts. BITO doesn't invest directly in bitcoin, but rather in bitcoin-pegged futures contracts. Morningstar's global director of ETF research Ben Johnson says this structure can lead to returns that can fall short of how bitcoin actually performs. Over time, thanks to the way the futures market works, BITO "will be in effect systematically selling low and buying high."

But for now, at least, a good number of investors have thrown that caution to the wind.

Trading volume by first-day ETF standards was huge, with more than $1.01 billion worth of shares changing hands. (However, these numbers are still small compared with, say, the $71 billion on average that changes hands in SPDR S&P 500 ETF Trust SPY, generally one of the most actively traded ETFs.)

BITO’s debut was outdone only by BlackRock U.S. Carbon Transition Readiness ETF LCTU, which launched in April this year and generated $1.16 billion on its first day. One caveat to these trading figures is that some funds see elevated first-trading that results from a high level of so-called seed capital, which is money invested in the fund by sponsors which enables the ETF to start trading. But with BITO, there was a relatively low $20 million of seed capital, so the volume reflected "organic" trading.

With ETFs, the number of shares changing hands doesn’t equate to money being invested in the fund itself. However, BITO’s trading volume did come on top of a hefty amount of cash being invested in the fund.

Based on data from ProShares, BITO took in $550 million in its first day. The Morningstar Direct database counts that as the second-largest ETF for reported day-one assets under management, when we factor out funds that had high levels of seed capital. (And given that the largest on our list, the Van Eck fund, launched with assets exchanged from other funds, BITO may be the largest ever when it comes to true investor inflows.)

Thanks to that haul, out of the 10 currency funds tracked by Morningstar, BITO dwarfs the now second-largest fund in the category, Invesco CurrencyShares Euro Currency FXE, which has $276 million in assets.

This puts BITO in rarified company. SPDR Gold Shares GLD, Invesco QQQ Trust QQQ, and Vanguard Total Stock Market ETF VTI are some of the biggest funds in their investment classes. However, it also joins United States Oil Fund USO, which, like BITO, is a futures-based strategy that at times has seen investor returns fail to track underlying oil prices thanks to the fund’s underlying structure.

BITO's launch came as bitcoin itself has marched to a new record high. Traders have bet that the launch of BITO, as well as other coming exchange-traded products, will draw still more buyers into the market for bitcoin. Bitcoin is up more than 130% in 2021.

On its launch day, BITO gained 4.85% over the course of the day, tracking the rise of the cash bitcoin market.

Of course, performance of any fund on its first day--or any day after that--depends on moves in the underlying assets. But BITO had fortuitous timing.

Of the 19 most actively traded funds on launch day, BITO posted the second-best performance. Only iShares Silver Trust SLV performed better when it advanced 4.93% in its debut.