Bitcoin is often referred to as “digital gold.” Debate remains about how similar the cryptocurrency and commodity are. Yet they do have some comparable traits. Those include that direct ownership of either doesn’t come with an income stream by way of dividends or bond coupon payments.
Investors owning physical gold or traditional related ETFs are dependent on capital appreciation. The same is true of their bitcoin-owning counterparts. Fortunately, a new wave of ETFs bring income to the bitcoin equation. The NEOS Bitcoin High Income ETF (BTCI ), which turns a year old this week, is part of that conversation.
To its credit, and arguably in quiet fashion, BTCI is one of the most successful rookie ETFs of the past 12 months. An assets under management tally of nearly $872 million confirms as much. That’s also confirmation that market participants, when afforded the opportunity, will embrace the combination of bitcoin and income. On that front, BTCI delivers the goods, as highlighted by a trailing 12-month distribution rate of 27.32%.
BTCI Features a Straightforward Approach
BTCI is elegantly simple in its approach to the bitcoin/income pairing. It’s a covered call ETF, writing options on the VanEck Bitcoin ETF Trust (HODL ) and the iShares Bitcoin Trust (IBIT ). Those are two of the largest, most liquid spot bitcoin ETFs. It’s also worth noting BTCI is actively managed. That’s a potentially favorable management style when considering bitcoin’s reputation as a volatile asset.
“BTCI aims to offer exposure to Bitcoin via ETPs with a data-driven call option overlay that seeks high monthly income and upside potential. The Fund may provide a way to pursue high levels of current income from Bitcoin’s price volatility, a source that’s potentially less correlated to traditional income oriented investments,” according to NEOS.
BTCI’s status as an actively managed ETF could be alluring to investors for another reason. With a management team maintaining a hands-on approach, it’s possible bitcoin-linked income opportunities will be maximized while not dampening too much of the fund’s upside potential.
The latter point is pertinent because many index-based covered call ETFs and even some active counterparts substantially limit upside participation in the underlying asset in the name of generating income. For its part, BTCI returned more than 24% for the six months ending October 10. Yes, that’s off bitcoin’s trail. But when factoring in the yield component, BTCI has been impressive from the perspective of total returns.
For more news, information, and analysis, visit the Tax Efficient Content Hub.
