Why Bitcoin Futures Funds Like BITO Keep Losing Ground to Direct-Holding Alternatives
Key Summary
BITO, the first US Bitcoin ETF, has underperformed since its launch in 2021 due to recurring futures contract costs, which compound over time, shrinking exposure. In contrast, direct-holding funds like IBIT have outperformed, with IBIT showing a 58% gain in five years compared to BITO's 0% gain. Investors have flowed $69 billion into IBIT, while BITO has only received $1.69 billion.
Comparison of BITO and IBIT Structures
BITO, the first US Bitcoin ETF, was launched in 2021, giving investors exposure to Bitcoin through futures contracts. In contrast, IBIT holds Bitcoin directly. The recurring cost of rolling futures contracts forward has led to BITO's underperformance. Every time a futures contract expires, the fund must sell it and buy a later-dated one, which costs more. This process compounds over time, shrinking exposure. In contrast, direct-holding funds like IBIT have no contract to expire and no operating costs. IBIT has shown a 58% gain in five years, while BITO has reported a 0% gain.
Market Performance
BITO has trailed IBIT in all measured windows, with IBIT leading in all three. BITO's price has fallen further in falling months and risen less in rising months. Bitcoin itself has declined 29.64% between October 7, 2025, and October 7, 2026. During that time, the spot fund lost roughly a third of its value. IBIT was a painful investment over the past year, but it has outperformed BITO.
Investor Flows
Investors have flowed $69 billion into IBIT, while BITO has only received $1.69 billion. This significant difference in investor flows highlights the effectiveness of direct-holding funds like IBIT. BITO's recurring futures contract costs have led to its underperformance, making it an ineffective investment for many investors.
Conclusion
The comparison between BITO and IBIT reveals the structural differences between futures-based and direct-holding funds. BITO's recurring futures contract costs have led to its underperformance, while IBIT has shown a 58% gain in five years. Investors should consider the effectiveness of their investment strategy and the impact of recurring costs on their returns.
Image Prompt
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