Summary ProShares Bitcoin ETF (BITO) offers high-yield monthly distributions, closely tracking Bitcoin’s price via swaps and futures, not direct Bitcoin ownership. BITO has maintained positive NAV and compelling distributions, even amid Bitcoin’s volatility; recent NAV growth is 63.77% over three years. Current downward pressure on BITO is viewed as temporary, with confidence in Bitcoin’s long-term upward trajectory supporting a bullish outlook. BITO is best used as a 3–5% portfolio allocation for income, with diversification and position sizing critical to managing Bitcoin-driven risks. Bullish Thesis Based upon my bullish outlook for Bitcoin heading into 2026, I see BITO surprising to the upside — with both growth and income as the price of Bitcoin jumps. My reason for being so bullish with Bitcoin is, first, the growing adaption by institutional investors and even countries, along with favorable support from the U.S. and other governments. For those reasons, and the conviction the four-year Bitcoin cycle of the past is over, makes me believe 2026 is going to be a good year for the crypto. Why I believe the four-year cycle is over is because the low amount of Bitcoin being mined from its inherent code, makes the number of new Bitcoin available less important, even as growing scarcity further props up the price. Growing demand and decreasing supply is the perfect recipe for the bull market in Bitcoin to continue. Bitcoin should continue to climb for some time into the future, but it'll continue to experience a lot of volatility, which will be a positive outcome for BITO. If my bullish thesis is correct, it means BITO will not only increase its distribution because of the option premiums generating income but will also enjoy growth in the share price of the ETF from the strength of Bitcoin's upward growth trajectory. Overview ProShares Bitcoin ETF ( BITO ) is the first ETF in the U.S. that was linked to Bitcoin (BTC-USD). It has consistently paid out hefty distributions on a consistent basis since it was introduced in October 2021. After Bitcoin reached its all-time high, the inevitable correction came, and the share price of BITO came under pressure in alignment with the price movement of Bitcoin. It doesn't own Bitcoin but utilizes swaps and futures to generate income for shareholders. Even with the volatility associated with Bitcoin, BITO has been able to maintain positive NAV during the time it has paid out distributions, as of the end of November 2025. Over the last three years NAV has been a positive 63.77%, although from inception it is at positive $3.98%. The reason for that is almost at the time of the introduction of the fund Bitcoin corrected for about a year. Seeking Alpha Since then, up until recently, it has experienced a prolonged upward move, along with the usual volatility. The performance of BITO moved in conjunction with the price movement of Bitcoin. In this article we'll look at why I believe BITO has an excellent future ahead of it, and why the current downward pressure should be only temporary. What It Is and What It does BITO used swaps and futures contracts with Bitcoin as the underlying, resulting in strong income generation which is paid out monthly. The primary purpose of the ETF is to generate income. It can at time generate growth, but it's a byproduct of the holding, not the main reason for introducing it to investors. I like how it works because there are other Bitcoin growth products that can be invested in, such as iShares Bitcoin Trust ETF (IBIT). Some have argued that it's better to invest in IBIT rather than BITO, but when the purpose to take a position in BITO is to generate consistent income, IBIT or similar ETFs don't make any sense in that regard. What the fund managers do is invest in Bitcoin futures traded on the Chicago Mercantile Exchange ((CME)). Being actively managed, the ETF managers can roll the contracts over, bringing ongoing exposure to the flagship crypto. That allows fund managers to provide investors exposure to the volatility related to Bitcoin in order to generate income. The risk associated with the strategy is if the price of Bitcoin remains subdued for a prolonged period of time. BITO and Bitcoin As mentioned above, BITO uses swaps and futures to generate income based upon the volatility associated with Bitcoin. How Bitcoin performs is how BITO will perform. For that reason, investors should have a solid grasp of Bitcoin in order to understand the strengths and weaknesses of BITO. If one isn't familiar and knowledgeable about Bitcoin, it would be easy to sell off if total returns start to show a loss. There is also the probability of being influenced by those that oppose Bitcoin and ETFs like BITO, primarily because they operate from a growth mindset. If one believes in Bitcoin, then BITO is an excellent way to gain exposure for those seeking to add significant income to one's overall portfolio. Seeking Alpha For me, I've been in Bitcoin for many years and have a solid grasp of what it is, why its future looks very bright, and why I believe the current correction is temporary. I see pullbacks as only breathers for the next lag up. With that in mind, it would take a lot for me to sell my BITO shares, even when they get hit hard like they have been. BITO Distributions BITO's distribution history is unique in that it actually struggled to pay out a strong dividend in 2023, where usually in the earlier stages of an ETF like BITO, they tend to pay out much higher earlier on and decline in payouts as the fund ages. Seeking Alpha As it went into 2024, the fund distributions started picking, with its highest and most consistent distributions coming in April 2024 to the end of the year, where it paid out well over $1.00 per share or unit at that time, and the two times it was under that it was $0.99 and change. In 2025 the distributions dropped a little but still paid out over $0.75 per share or unit, with the exceptions of $0.36 in April 2025, and $0.54 in May 2025. After that, distributions jumped nicely, even under more adverse conditions. Seeking Alpha What I particularly like about BITO is it had a long enough track record now to see how distributions are affected by the performance of Bitcoin, and so far, with a few exceptions, it continues to pay out a solid distribution monthly. Being able to do that while maintaining positive NAV is a strong accomplishment. I expect there to be a slight downturn in NAV for the quarter ended December 2025, because of the weakness in Bitcoin, but it shouldn't be much more than a slight turn to the red. Nonetheless, even if it turns to the red some with NAV and or its share price during this period of time, being able to pay out the level of distributions it is has done from month to month, makes it a strong performer in the high-yield income space. Risks Bitcoin risk The most obvious risk for BITO is its exposure to Bitcoin price movements. If the price of Bitcoin were to continue to be under pressure longer than expected by the market or investor, it would result in the probability of NAV erosion until the price of Bitcoin rebounds. While we haven't seen it in the ETF yet in any meaningful way, it's possible if Bitcoin were to remain under downward pressure it could result in distributions dropping to levels not experienced for any significant period of the fund since early 2024. Again, what has impressed me so far with BITO is how it has responded so well to the volatile nature of Bitcoin. It has dropped little in distribution levels from 2024 to 2025, but they still remain very compelling in a challenging market environment. Yet, how Bitcoin goes will be how BITO goes, and having exposure to only one underlying does present risk if the underlying underperforms for a long period of time. Portfolio risk Another risk not also thought of by investors is portfolio risk. What I mean by that is income-generating holdings like BITO should be part of an overall portfolio, rather than a standalone income holding. Those that aren't diversified and properly managing position sizing, could get hit harder than they need to be if they only have one or a few high-income yielding ETFs. Under that scenario, the risk is very high if even one of them gets hit hard. After all, the point of income is to be able to generate it without a portfolio shrinking disproportionately because of only a few, riskier holdings that have the potential to crash at some time. It's understandable when an investor is starting to build an income portfolio, because you have to start somewhere. But as shares are acquired it should be done with the idea that as soon as possible one should start adding shares from other income-generating ETFs as well. I tend to think of an ETF like BITO being in the 3% to 5% range of an overall income portfolio. For those that understand Bitcoin well and are bullish on the long-term future of it, maybe a little higher level of position sizing would be appropriate. That said, I would still continue to work on building a diversified portfolio and gradually work in a higher weighting for those that are bullish on BITO. How this is done should be considered in light of age, years to retirement, and specific income investing goals of each individual investor. Conclusion My BITO shares have been hit hard lately, but I don't even think in terms of selling any of them. I'm absolutely convinced the price of Bitcoin has a long, upward growth trajectory ahead of it, and BITO is an excellent way to ride that thesis. Not only will BITO continue to generate impressive income for those holding the ETF, but they, based upon past performance of the ETF in correlation with the price movement of Bitcoin, should also enjoy growth along with it. I don't invest in BITO with expectations I'll get any growth out of it, but after studying and owning a number of high-yield ETFs, it's among one that I'm most bullish on for growth and income long into the future. Before the recent decline in the price of Bitcoin, BITO was producing both growth and income for me, and I expect to continue to do so when Bitcoin reverses direction.
