Summary NEOS Bitcoin High Income ETF and ProShares Bitcoin ETF are two specialized Bitcoin ETFs designed to generate high yields for distribution. Fund analysis supports a "Hold" rating for BTCI and a "Sell" rating for BITO. BITO faces significant risks due to its potential inability to sustain high payouts amid declining Bitcoin prices. BTCI could serve as a "safe haven" should Bitcoin prices remain range-bound for an extended period. Investment thesis This article concludes my comparative analysis of the main cryptocurrency ETFs, identifying the leaders and laggards during the bear and bull markets for Bitcoin. At first glance, NEOS Bitcoin High Income ETF (BTCI) and ProShares Bitcoin ETF (BITO) appear fundamentally similar, whereas a more detailed analysis reveals significant differences between them. Furthermore, it is in this pair, I believe, where one of the main underperformers among exchange-traded funds with cryptocurrency instruments as their underlying assets is hidden. Considering that the price of Bitcoin may continue to decline by up to 20%, investing in these assets requires particular caution. Especially in BITO, who risks not being able to continue paying the current high dividend yield. Fundamental similarities and differences between BITO and BTCI BITO and BTCI funds are structurally similar players in the crypto asset ETF market, focusing on generating cash flow through Bitcoin. If we compare these funds with spot ETFs (such as IBIT), we see that they are focused on generating high returns not only during a Bitcoin bull market, but also regardless of the market cycle. These funds leverage the high volatility of crypto assets to generate income, allowing them to make high monthly payments to investors. As a result, both BITO and BTCI are actively managed, meaning that portfolio managers make real-time decisions to generate cash flow. If BTCI actively selects strike prices and expiration dates for call options, then BITO makes decisions on rolling from one futures contract to another. Even though these funds have Bitcoin in their names, neither of them holds it directly. They use derivatives in their investment strategy, so they don't have to deal with the operational risks of intermediaries when cold storing crypto assets. Like I said, they use high volatility, meaning they cash in on any active Bitcoin price movements. For BTCI, they do this by increasing the value of the options they sell. And for BITO, it's by locking in more profits on futures when prices go up. Although these funds have very similar investment concepts (at first glance), a deeper analysis of the fundamental similarities between BITO and BTCI allows us to identify the criteria by whom they should be distinguished. They are, essentially, two different instruments in terms of their internal structure and objectives. Firstly, it is reflected in the fact that they have different underlying assets. BTCI is based on spot ETFs, whereas BITO is based on Bitcoin futures. In addition, their income generation mechanisms differ, since options and futures have differences. The first case involves receiving a premium from the sale of call options, whereas the second case involves the distribution of realized profits from rollovers. When you invest in BTCI, it's like choosing a fund where only 20% of the portfolio is made up of the underlying asset, Bitcoin. Other assets are structured option contracts and government bonds that let you mimic owning Bitcoin and generate monthly income for shareholder payouts. However, the BTCI allows for synthetic exposure to Bitcoin. In other words, the fund earns when the underlying asset itself rises, yet its growth potential is limited due to the call options sold. By using positions through other Bitcoin ETFs, it applies its call option selling strategy to them. When the market starts to grow sharply, it means losing potential profits from the growth in the value of the crypto asset. In a sideways market, BTCI is the one that can generate extra income. With BITO, owning Bitcoin futures contracts means buying contracts at a future price. In periods when the future price is higher than the current price, a fund loses some of its returns when rolling over from an old contract to a new one. The funds also differ in terms of dividend yield. Both have high yields, with BITO significantly higher. Its current dividend yield is 78.29%, whereas BTCI's is 36.44%. That's 1.14 times more. The high payout ratio at BITO is due to the fact that the fund has to distribute almost all of its realized profits. Each time the price of Bitcoin goes up, additional profits are generated, and these are paid out to shareholders. But if the price of Bitcoin keeps going down or stays flat, those dividends could drop a lot ( they're already going down from $1.77 to $0.74 ). That's why BITO's high dividend yield isn't really reliable. Dividend History of BITO When it comes to BTCI, the advantage here is that payments are more predictable . They can even be maintained during periods of moderate Bitcoin price declines (as we are seeing in the fall and winter of 2025). Portfolio managers of BTCI aim to generate stable monthly payments, where the target range for the year is set at around 30%. The dividend yield is supported by the volatility of the Bitcoin price. When the market is more volatile, it is more likely that bonuses will be received, and these will be distributed to investors. Dividend History of BTCI In addition, we would like to briefly discuss the difference in tax efficiency between funds. The BTCI has high tax efficiency because it uses a capital return optimization strategy. Thanks to this, the investors can reduce their tax payments on dividends received, since part of the payments is considered a return of funds rather than income. BITO has standard tax efficiency, whereby dividends are considered ordinary income, making them subject to high taxation. If you are focused on generating passive income with stable payments, you believe in the long-term growth of Bitcoin, and you require high tax efficiency of payments, BTCI is exactly the asset you need. BITO cannot boast such features, making it a less profitable fund in terms of overall performance. Comparative table of BITO and BTCI The table below compares the main criteria that distinguish BITO and BTCI. Many criteria favor BTCI. Firstly, the Sharpe ratio is historically higher for the selected fund. BTCI's operating mechanism allows it to receive a premium from options even if the price of Bitcoin falls, thereby improving the risk/return ratio. The managers of BITO completely trust the movement of the Bitcoin futures price, making the fund's results more volatile. The difference in beta to Bitcoin is also worth noting. The standard indicator for BITO is 1.0x, making it highly correlated with the price of the crypto asset. BTCI, however, has a significantly lower beta. Thus, when the price of Bitcoin falls by 10%, the return on BITO decreases by 10%, whereas BTCI's return decreases by 5%. At the same time, this characteristic reduces potential profits when the price of Bitcoin rises sharply. Criteria BTCI BITO Underlying asset Spot Bitcoin ETFs Bitcoin futures ((CME)) Income mechanism Premium from sale of call options (Covered Call) Distribution of realized profit from rollover of futures Tax form and Tax Alpha 1099 (No K-1) High (using ROC) 1099 (No K-1) Low (normal income) Beta to Bitcoin ~0.45–0.60 ~1.05 Sharpe ratio ~2.1–2.3 ~0.8–1.1 Number of Holdings 14 4 P/NAV 1.00x 1.00x Expense Ratio 0.99% 0.95% Short Interest 6.27% 16.93% AUM $ 990.38M $2.15B Dividend Yield (TTM) 36.44% 78.29% Dividend frequency Monthly Monthly Total Return, 1M -1.73% -3% Total Return, 6M -15.26% -20.74% Total Return, 1Y -3.22% -13.28% This key difference between the funds is reflected in their overall return figures. Alas, they both have negative values for the period from one month to one year. But while the total return of BTCI for the last year was -3.22% , that of BITO was -13.28%. That is why, for me, BTCI demonstrates better results in terms of capital preservation, whereas BITO is prone to costs from rolling over futures. If the market continues to decline, it will be necessary to pay out previous dividends from the capital base. This makes BITO a risky asset in the long term, so my recommendation for it is to "Sell." In order to make the analysis of BTCI's total return complete, for comparison I added BLOX ( which I recommend "Buy" ) and IBIT ( which I recently downgraded to "Hold" ). Only because of the recent launch of BLOX (less than a year ago), a 6-month period was used. Total Return, 6M Risks of investing in BTCI and BITO As my recommendation for BITO is "Sell," I am not assessing the risks associated with it, because I am unlikely to make a decision to invest in this asset in the future. For BTCI, I recommend "Hold," meaning that there is potential for the rating to be upgraded to "Buy." For those who already have BTCI in their portfolio, there is one major risk to consider when investing in this asset: profit-taking in the event of a Bitcoin price recovery. As a reminder, the beta is around ~0.45–0.60. Therefore, even if Bitcoin rallies by approximately 20%–30% from current prices, BTCI will only increase in value by 10%–15%. In other words, the current total loss of -15.26% over the past six months may not be offset. This is why investing in such an asset seems risky to me if a bull market is expected. But since Bitcoin has the potential for a 20% correction, this risk can be offset by the advantage that BTCI managers generate income even if the price of the underlying crypto asset falls. Conclusion The results of the comparative analysis between BITO and BTCI reveal fundamental differences between them, as reflected in the actual performance of the funds. Between these two assets, my choice would be BTCI, because it can generate cash flow while protecting against moderate Bitcoin price volatility. This is ideal for conditions when the market is in a sideways range. But in the event of a price increase, some of the profit will be cut off. That is why my recommendation for this asset is "Hold." BITO, meanwhile, has a high speculative nature and is suitable for a bullish Bitcoin market. However, it would be a mistake to choose BITO if you expect the downward correction in the cryptocurrency market to continue or if you expect the price to fluctuate in a sideways range for a long period of time. In general, comparing its total return with other assets, like BLOX and IBIT, allows us to recommend "Sell."
