Key Insights
- BTCI is a distinctive Bitcoin ETF boasting a 25% dividend yield.
- Over the past few months, the fund has experienced a surge in inflows.
- Historical performance indicates a tendency for the fund to lag behind Bitcoin.
Supported by a continued market recovery, Bitcoin ETFs are performing strongly this month, drawing in over $774 million in assets on Tuesday following a $998 million gain on Monday. These inflows total $2 billion for the month, building on the $3.52 billion added during the previous month. This piece examines a different kind of 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 transaction. Despite the acceleration of the crypto winter, the fund has maintained strong inflows throughout the year.
Figures compiled by ETFdb indicate that the fund has attracted over $651 million in year-to-date inflows, lifting its total assets under management (AUM) beyond $1.39 billion.
BTCI ETF inflows | Source: ETF Db
Unlike spot Bitcoin ETFs provided by issuers such as BlackRock, Fidelity, Grayscale, and Bitwise, the BTCI ETF stands out as a specialized fund.
Rather than holding Bitcoin directly, the fund purchases shares in the iShares Bitcoin ETF (IBIT) and the VanEck Bitcoin Trust (HODL), alongside short-term US Treasury bills. This strategy allows it to capture upside when Bitcoin prices climb.
Concurrently, the fund leverages the options market to produce returns by selling (writing) call options on Bitcoin-linked assets such as IBIT or HODL. This generates premiums that are subsequently paid out to investors as dividends.
Information on the fund’s official site lists its distribution rate at 25.60%, alongside a trailing twelve-month (TTM) distribution rate of 36.5%. These figures are remarkably high, implying that a $100,000 allocation would have generated roughly $36,000 in dividend income over the TTM period.
By contrast, Bitcoin itself does not distribute monthly returns, nor do traditional spot Bitcoin ETFs like IBIT, FBTC, and HODL.
Is This Bitcoin ETF a Good Investment?
The primary advantage of allocating capital to the BITC ETF lies in the substantial dividend payments it delivers to shareholders.
Even so, several notable hurdles accompany an investment in the vehicle. Most prominently, it carries a steep expense ratio of 0.98%. This fee is notably high when compared to alternatives like the Vanguard S&P 500 ETF (VOO), which requires an annual fee of just 0.03%.
For further comparison, the IBIT ETF features a 0.25% expense ratio, whereas Morgan Stanley’s Bitcoin ETF (MSBT) runs at only 0.14%, making the cost disparity quite significant.
An additional drawback is that despite its attractive distribution yield, the BTCI ETF’s overall performance in terms of total return leaves room for improvement. Total return accounts for both price appreciation and dividend generation combined.
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%, indicating that a direct holder of Bitcoin achieved superior overall performance.
A comparable pattern emerges over the trailing 12-month window, where BTCI recorded a total return of negative 23% while Bitcoin fell by 22%.
Examining other covered call ETFs reveals a broader trend of underperformance relative to their underlying assets. A relevant parallel is the MSTY ETF, which tracks Michael Saylor’s Strategy and has consistently lagged behind its benchmark asset over time.