So, I was playing around with back testing BITU, the new ProShares Bitcoin ETF that is daily leveraged 2x (similar to SSO, QLD, etc) and the results are shockingly spectacular.
In 2020, BTC closed at $8,746 the day of the halving. The daily closing peak of the cycle came on November 8th, 2021, when BTC closed at $67,582, representing a gain of 673.09% from the closing price on the halving date. However, when daily leveraged at 2x, it reaches a closing price on November 8th, 2021 of $236,945.11, representing a gain of 2,610.47%, which you may note is nearly 4x the actual gain by BTC. Note that you actually get a greater gain with the 2x leveraged version with the April 2021 peak, when it reached over $306,000 for an even larger gain.
2021 was somewhat of a weird cycle top given the summer lull and the double top formation, so I also looked back at the prior cycle. Here, the halving occurred on July 9th, 2016 with a closing price of $657.61. For this cycle, it reached its top closing price on December 16th, 2017, with a price of $19,650.01, an increase of 2,888.09%, a hefty return in its own right. However, if you leverage this daily to 2x, it reaches a peak of $247,655.90, a gain of 37,560%, which is over a 10x of what you would've gotten with the underlying BTC.
This all seems so crazy and too good to be true, and it probably is. It is true that with crypto, there is always a chance of a black swan type event that tanks BTC 40%, and thus the 2x one would plunge 80%, for example. And in both of the above examples, you would want to sell before the onset of the bear market as it hits hard, though it's not as bad as I would've expected. Indeed, if you held a 2x BTC from the 2015 halving through now, you'd still be up on just 1x BTC, with an insane level of volatility along the way.
Thoughts, fellow degens? Talk me off the ledge from actually allocating some of my capital towards this? A lot of "normal" folks would suggest these funds can't be held long-term, but some of us know they can be in some situations, and crypto bull markets seem like potentially one of those cases. However, the issue with crypto is always the lack of historical context. With so little history behind it, assuming this cycle will be the same as the ones of the past might be foolhardy.
I'd thought volatility decay would make this asset unworkable long-term, but if anything the volatility seems to just increase the returns, even though it would be a tough ride to hold on during.
EDIT: To be clear, I do understand this is a degen, high-risk strategy that can truly ruin your portfolio. I was just illustrating how it seemingly would've worked in the past. Whether that will work this cycle is anyone's guess. It seems like a Lambos or Food Stamps type strategy.
No comments:
Post a Comment