, its 25.6% distribution rate, high expense ratio, and how its total return compares to holding Bitcoin.){kind=link}
Key Insights
- BTCI is a distinct Bitcoin ETF featuring a 25% dividend yield.
- Over the past few months, the fund has experienced a surge in inflows.
- Historical data indicates that the fund generally lags behind Bitcoin’s performance.
Bitcoin ETFs are performing strongly this month, bolstered by a continuing market rebound. On Tuesday, they brought in over $774 million in assets, following a $998 million inflow on Monday. These inflows total $2 billion for the current month, building on the $3.52 billion added during the previous month. This piece examines a different Bitcoin ETF that distributes a monthly dividend.
BTCI ETF Assets Have Jumped to $1.32 Billion
The NEOS Bitcoin High Income ETF (BTCI) was introduced in 2024 by NEOS—a firm currently being acquired by Goldman Sachs in a $2.25 billion agreement. The fund has continued attracting major inflows this year, even as the crypto winter intensified.
Information compiled by ETFdb reveals that the fund has pulled in over $651 million in year-to-date inflows, driving its total assets under management (AUM) past $1.39 billion.
BTCI ETF inflows | Source: ETF Db
Unlike spot Bitcoin exchange-traded funds managed by firms such as BlackRock, Fidelity, Grayscale, and Bitwise, the BTCI ETF stands out as a unique product.
Rather than holding Bitcoin directly, the fund purchases shares of the iShares Bitcoin ETF (IBIT) and the VanEck Bitcoin Trust (HODL), alongside short-term U.S. Treasury Bills. This strategy allows the fund to capture upside whenever Bitcoin prices climb.
Simultaneously, the fund leverages the options market to produce returns by selling (writing) call options on Bitcoin-linked assets like IBIT or HODL. This generates premiums that are subsequently paid out to investors as dividends.
Official website data indicates a distribution rate of 25.60% for the fund, alongside a trailing twelve-month (TTM) distribution rate of 36.5%. These figures are exceptionally high, meaning a $100,000 allocation would have theoretically yielded around $36,000 in dividend payouts over the TTM period.
By contrast, Bitcoin itself does not generate monthly distributions, a characteristic shared by traditional Bitcoin ETFs like IBIT, FBTC, and HODL.
Is This Bitcoin ETF a Good Investment?
The primary advantage of purchasing the BITC ETF lies in the substantial dividend income it delivers to shareholders.
Nevertheless, putting money into the fund comes with several distinct drawbacks. Chief among them is its steep expense ratio of 0.98%. This fee is notably high when compared to the Vanguard S&P 500 ETF (VOO), which costs a mere 0.03% annually.
For comparison, the IBIT ETF features an expense ratio of 0.25%, and Morgan Stanley’s Bitcoin ETF (MSBT) is priced at only 0.14%. Such disparities in fees can add up significantly over time.
An additional hurdle is that while the BTCI ETF boasts a generous distribution rate, its overall total return leaves room for improvement. Total return accounts for gains stemming from both price appreciation and dividend distributions.
As illustrated in the chart below, the BTCI ETF posted a total return of -4.36% for the year, while Bitcoin dipped by 2.63%. Consequently, direct holders of Bitcoin achieved a superior total return.
A similar pattern played out over the preceding 12 months, during which BTCI recorded a total return of negative 23%, while Bitcoin declined by 22%.
A broader examination of alternative covered call ETFs reveals a consistent pattern of underperformance relative to their underlying assets. For instance, the MSTY ETF, which tracks Michael Saylor’s Strategy, has historically trailed its underlying asset over time.
Frequently Asked Questions
What is the BTCI ETF?
The NEOS Bitcoin High Income ETF (BTCI) is a unique cryptocurrency fund launched in 2024 that generates income by investing in existing Bitcoin ETFs, U.S. Treasury bills, and trading options.
How does BTCI pay such a high dividend?
The fund sells call options on Bitcoin-related assets like IBIT or HODL to collect premiums, which are then distributed to investors as high monthly dividends.
Does BTCI hold actual Bitcoin?
No, the fund does not directly own Bitcoin. Instead, it holds shares in other spot Bitcoin ETFs, short-term U.S. Treasury bills, and utilizes the options market.
What are the main drawbacks of investing in BTCI?
The primary concerns are its high expense ratio (0.98%) and a history of trailing the total return performance of direct Bitcoin holdings.