Bitcoin (BTC) prices rose over the weekend on the announcement of a U.S. crypto reserve, though no further details were provided by the current administration. Heightened volatility in bitcoin could prove beneficial for strategies like the NEOS Bitcoin High Income ETF (BTCI ), as evidenced by the fund’s distribution rate.
After one of the worst weeks for bitcoin prices since 2022, the largest cryptocurrency made significant recovery over the weekend. The gains followed an announcement of a strategic crypto reserve for the U.S. by the current administration, reported CNBC. The reserve will purportedly include bitcoin, ether, XRP, and the tokens for Cardano and Solana. Further details regarding the reserve could follow at the White House Crypto Summit happening at the end of the week.
Bitcoin prices fell in a tumultuous slide, to a low of $78,226 last week, once prices crossed below the $90,000 support of recent months. However, in the wake of the crypto reserve announcement over the weekend, bitcoin bounced back significantly. Prices climbed as high as $95,000 in weekend trading. As of mid-day trading on Monday, March 3, bitcoin prices hovered around $90,700.
An elevated degree of volatility is the norm for bitcoin and other cryptocurrencies. BTCI seeks to harness the upside potential of bitcoin, while also generating additional income from its option writing strategy.
Since the fund’s launch last year, BTCI is up 15.74% on a total return basis as of February 28, 2025, according to Y-charts data. BTCI also boasts a distribution rate of 29.50% as of January 31, 2025. Distribution rate annualizes the most recent distribution and then divides by the fund’s NAV.
The fund invests in bitcoin futures ETFs and options contracts that use BTC futures ETFs for their reference asset. This creates synthetic exposure to BTC through BTC futures while also writing covered call options on BTC futures ETFs to generate high monthly income. The strategy uses a rules-based, systematic, proprietary model to determine its options positions.
Covered call options entail buying an asset while also writing a call on the underlying asset. This generates a premium, but also caps the upside potential, should the underlying asset appreciate. Options strategies like BTCI often benefit from volatility, earning higher premiums on call writing (and thereby income) when volatility spikes. Given bitcoin’s enhanced volatility, it could prove an attractive source of additional income for BTC investors.
The fund’s managers may also engage in tax-loss harvesting to capture losses in order to offset gains made.
BTCI has an expense ratio of 0.98%.
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