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Whatever You Do, Don't Buy This ETF!

Written by Jason Williams
Posted October 22, 2021

Well, it finally happened this week. The SEC didn’t stop the first Bitcoin ETF, ProShares Bitcoin Strategy, from launching into the markets. And it was pretty well-received.

The new product topped $1 BILLION in trading activity on its first day, making it one of the top ETF debuts in history.

Later that day, the underlying asset, Bitcoin, shot past its old all-time high of $64,895 to set a new one close to $67,000. And other cryptos like Ethereum shot up as well.

Even the old-timer on the market, the Grayscale Bitcoin Trust (GBTC) saw some action, rising from around $45 on Monday to over $52 on Wednesday.

And on the day of the debut, GBTC actually filed to switch from being a trust to an ETF as well.

It would seem that this cryptocurrency “fad” isn’t going away anytime soon…

But you already knew that because we’ve been telling you these digital currencies have a place in your portfolio since Bitcoin cost about $500.

But we’re not recommending you put this new ETF (or any of the ETFs based on Bitcoin futures) in your portfolio. That’s because, unbeknownst to most investors, those funds come with an awfully expensive price tag.

And I’m not talking about the valuation…

Getting Tough to Carry

You see, when you build an ETF based on futures contracts and not the actual underlying security, you’ve got a problem.

The security is around forever, but those contracts expire. And before they do, the fund has to “roll” them into new contracts. That’s a continuous process and it means the fund is continually paying what’s known as “carry costs.”

At this point, just a few days into its existence, the new ProShares fund already accounts for 25% of open interest in both October and November contracts.

It’s going to keep growing, and more ETFs are coming. And as these products gather more assets as more and more investors pump money into them, that carry cost could impact both shareholders and the entire futures market.

These funds are going to be competing against each other in a relatively small market. That means they’ll be driving the prices up as they attempt to outbid each other for the contracts they MUST have.

And since mid-2019, the average cost of rolling the contracts has been about 8%–9%. The ProShares fund charges a fee of 0.95% to investors. But that’s not even making a dent in the expenses of carrying the trade.

With more ETFs in the pipeline, there’s going to be more activity on the futures contracts. And we could get into a situation where the ETFs drive their own prices up by making the contracts they hold increasingly more expensive.

That’s not usually a situation that ends well for shareholders. It’s especially bad for those who come in late and get none of the gains but get all the losses as the fund unwinds itself.

So I’m not going to recommend you go all-in on this one. Or any of the ones that will follow in its footsteps.

In fact, I’m not even going to recommend Bitcoin itself at this point.

It’s a crowded trade with way too many people who bought it because they felt like they should and very few who bought it because they understand what it is.

And with the spike of interest caused by the ETF debut and more celebrity stock pumpers — excuse me, I mean influencers — getting on Instagram, I’m not sure if the momentum will hold.

You’re getting into that whole “greater fool” territory where in order to make a profit when you sell, you’ve got to find someone dumber than you to buy it.

And to be perfectly honest, there are much better options out there that are still flying under the radar of most rank-and-file investors.

Bigger Than Bitcoin

You see, my colleague Christian DeHaemer has keyed into six small up-and-coming cryptos that he’s convinced are going to deliver returns that make Bitcoin look like a fools bet.

And in case you didn’t know, Christian is one of the original bulls on Bitcoin. Back when most analysts hadn’t even heard of the currency, he was recommending his investors buy it at $449.

The people that took that advice and held onto their coins grew that investment 140 times over thanks to his foresight.

He also recommended Ethereum, Bitcoin’s younger sister, at $96. That one just hit $4,300 in value, scoring those who listened and held another 40x gain.

So when Christian told me about these new cryptos he’d just uncovered, you’d better believe I was all ears. And when he told me he was more bullish on them than he’d ever been on Bitcoin or Ethereum…

Let’s just say I got a little excited. So I asked him if I could share his research here with you.

And incredible guy that he is, he agreed to put together a presentation detailing the market, the currencies, and how to get some of them into your portfolio.

But the thing is that these coins are already catching investor attention. In fact, the one he added to the model portfolio last week is already up double digits!

So if you want to catch the wave of profits coming this way, you’ll need to act quickly.

That’s why I’m urging you to hear what Christian has to say today — so you can get started investing immediately.

He’s done the research and I’m providing the connection. Now all you have to do is watch his presentation and set yourself up for the massive gains all but guaranteed to follow.

To your wealth,

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Jason Williams

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After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter, and co-authors The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.

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