Bitcoin Is Cheap, But BITU Isn't The Right Tool To Play The Rebound

Summary I rate ProShares Ultra Bitcoin ETF a Hold, given its leveraged structure and volatility decay. Based on Bitcoin's cycle, I don't think a good risk/reward case can be made to enter today. BITU consistently underperforms Bitcoin except during clear, sustained bull markets due to daily rebalancing mechanisms and high expense ratio. Entering BITU only makes sense when a strong Bitcoin bull trend is evident, such as after breaching previous ATHs or a prolonged period without new lows. As we may be entering a prolonged period of market "choppiness" for Bitcoin, BITU is not a good tool to gain mid- and long-term exposure to BTC. For long-term Bitcoin exposure, direct BTC or proxies like Strategy Inc. are preferable to BITU, in my view. The ProShares Ultra Bitcoin ETF ( BITU ) is a 2X leveraged ETF on Bitcoin ( BTC-USD ). With Bitcoin ~45% below its All-Time-High, a case could be made to enter BITU now and amplify the returns from a potential rebound. After all, I recently made a similar case myself on Strategy Inc ( MSTR ), arguing that MSTR is a buy at these levels even if Bitcoin never matures into a global reserve asset long term. For BITU, however, I think a buy case is premature, given the leveraged nature of this ETF and the risks of underperforming Bitcoin going forward if volatility persists. BITU Underperforms In Any Environment, Barring A Clear BTC Bull Market I covered BITU last time, roughly one year ago, when it sat near its ATH, arguing entering it then was not a good idea. Since then, the performance of this fund has been atrocious. The fund today sits 80% below its ATH, and it is underperforming Bitcoin on virtually any time frame (see below). BITU, 2024 to date (Seeking Alpha) While it is logical to expect BITU to underperform in bear markets, it also tends to do so in choppy markets. The chart below, which comes from my last coverage, illustrates exactly that. Even as Bitcoin rebounded from late 2024 to mid-2025 (the effect of Trump’s election), BITU lagged behind it. BITU, 2024 to 2025 (Seeking Alpha) The reason lies in BITU’s leveraged structure. Leverage is costly, and BITU charges an expense ratio of 0.98%, which is higher even than some 3x funds on equities. But more importantly, the fund suffers from volatility decay. This mathematical effect means that even if Bitcoin’s price returns to its all-time high, a 2× leveraged product like BITU will still lag due to daily rebalancing and the asymmetric compounding of gains and losses in volatile markets. Where Is Bitcoin Going From Here? When I cover stocks or funds, I usually refrain from short-term predictions or quick trade ideas. I disproportionately cover assets that I am comfortable in holding for at least a decade, with a few exceptions. BITU is one of these exceptions. I am covering it to provide my thoughts on most products linked to Bitcoin, but in writing about it, it is inevitable to have to provide some commentary on market timing. One of my favorite indicators in relation to predicting Bitcoin’s price is the cyclical geometry of Bitcoin (see the below chart). The idea is that Bitcoin follows historical cycles from ATH to local lows, as follows: From bottom to top in ~1064 days. From top to bottom in ~364 days. Binance This pattern has held valid for the entirety of Bitcoin’s history so far. If we are to believe history is to repeat itself, we would see a Bitcoin bottom roughly in October 2026, followed by a rebound to levels close to the previous ATHs in Q1 2028, and new ATHs around 2029 or 2030. The Long-Term Bitcoin Bull Case Vs. Bitcoin As An Online Casino As I described in much of my past Bitcoin coverage, I remain a long-term believer in Bitcoin as a new global reserve currency, simply by virtue of its superior technical characteristics and an increasingly fragmented geopolitical reality. But even if that scenario were never to manifest, I think it’s unlikely we will see Bitcoin simply going to trade at $0 per BTC. Rather, I think a bear case for Bitcoin looks like an “online casino,” with Bitcoin forever trading within a certain range and its utility derived from active trading and other, limited use cases. In this context, while I am generally not a fan of technical analysis, I think Bitcoin cycles can help gauge where sentiment may be headed. Given Bitcoin does not generate any yield, I think technical indicators can actually be a “self-fulfilling prophecy,” in that they become true as long as most market actors believe in them. BITU Is A BUY Only When A Bull Market Trend Is Clear Based on cyclicality observations, it seems to me we are nowhere near a solid beginning of a bull market for Bitcoin just yet. Even if the bottom is in, we may see volatility persisting well until 2027, at the very least. This is not the kind of environment where entering BITU makes sense, given the leveraged nature of the fund and volatility decay risk. I would rather enter BITU once a stronger case for a Bitcoin bull market can be made. This may be, for example: Once Bitcoin stops making new lows for more than six months. Once Bitcoin breaches the previous cycle’s ATH or the psychological threshold of $100,000 per BTC, to potentially catch the second leg of a new bull cycle. Simply around mid or late 2027, as a bet on Bitcoin having made a bottom and history repeating itself. As a note, BITU is also used by day traders, and in that it may be a good tool. Most leveraged funds, in fact, are designed with day trading in mind and not for long-term holding. BITU’s issuer, ProShares, curiously mentions both how this ETF has a daily investment objective and that investors may hold it “for longer than one day if [...] it is consistent with [...] goals and risk tolerance.” My HOLD rating ultimately reflects this nuanced reality. I think people that are unfortunate enough to have kept BITU in their portfolio through the recent bear market may just hold it for longer, betting on an early rebound and to avoid taxable events. I would not, however, recommend entering the fund just yet today. Risks: What If Bitcoin Suddenly Matures? In the context of my own long-term bullish thesis for Bitcoin, we may actually see a sudden maturity of this asset and a “break” in the cyclicality of it. I have covered this idea in detail here, noting that the stagnation in activity on the BTC blockchain and the quantity of Bitcoin in long-term supply (see below) are actually compatible with the idea that Bitcoin may become a new global reserve asset. Bitcoin Long Term Holder Supply (Bitbo) In such a scenario where Bitcoin rapidly increases in value to match, for example, silver in market capitalization, exposure to BITU may be beneficial even at today’s levels. What would be the trigger for such an event is yet another subject that goes beyond the scope of this article. An admittedly borderline Sci-Fi scenario in this regard is what I described in my recent article about Space Exploration Technologies Corp. ( SPCX ), arguing that the eventual unlocking of asteroid mining may push gold to become obsolete almost overnight, benefitting Bitcoin as a superior, scarce alternative. At the other end of the spectrum are the risks of actually holding onto BITU from today’s levels, which would be consistent with my rating. Bitcoin may break its historical cycle in a negative sense and never fully recover to its previous ATH. Obviously, an investment in BITU only makes sense if investors are bullish on BTC. Conclusion I am all up for buying Bitcoin when it’s cheap relative to its historical cycles. In fact, I made most of my returns in Bitcoin when I decided to DCA into it at the lows of the 2021-2022 bear market. I still hold the vast majority of my stake, even as it underwent a bull market and what currently increasingly looks like a bear market. The reason is that I believe it remains an asymmetric bet on a new global reserve currency, with incredible upside should that scenario manifest. BITU, however, is not the right tool for long-term exposure to Bitcoin. Unlike other BTC proxies, such as Strategy, this is a simple 2x leveraged fund on BTC. With high fees and being subject to volatility decay, it makes sense to enter it only once a BTC bull run seems to be well underway. Today, based on the cyclicality of Bitcoin, I do not think this is the case. I rate BITU a HOLD for anyone unlucky enough to have held it through Bitcoin’s bear market, as it may be worth betting the bottom is in and avoiding generating taxable events. But for those on the sidelines, simply buying Bitcoin or a proxy like Strategy are preferable choices, in my opinion.