Summary ProShares Bitcoin ETF remains a strong sell due to persistent underperformance versus newer ETFs and unreliable, sharply reduced distributions. BITO's 2026 distributions have collapsed to less than 1% annualized, following outsized 2025 payouts and negative Bitcoin performance. Distribution policy is highly variable, with potential for a short-term increase next month as a new tax year begins, but future payouts will be erratic. BITO's futures-based structure, high expense ratio, and NAV erosion make it unsuitable for long-term Bitcoin exposure or income-focused investors. The ProShares Bitcoin ETF ( BITO ) has staged a comeback since I last wrote about it in April and has recovered most of its 2026 losses. BITO is -7.23% YTD on a total return basis. Data by YCharts However, the distributions have not recovered in any shape or form - just look at 2026 compared to previous years. Seeking Alpha The payouts this year total $0.08921, or on average, less than $0.01 a month. That's quite a change from the regular $1 distributions just two years ago. This article looks at what has changed and why distributions could get a boost next month. BITO Overview BITO is a bit of a relic. It was launched in 2021 and was the first Bitcoin-linked ETF. That was possible way before the newer ETFs such as the iShares Bitcoin Trust ETF ( IBIT ) came into existence, as BITO gets its exposure to Bitcoin through futures contracts. It's a costlier (0.95% expense ratio) and more complicated way than simply owning the underlying, and consequently, the returns are less than the likes of IBIT. The underperformance gets painful over the years, and there's no doubt BITO is a poor option for long-term Bitcoin exposure. Data by YCharts One of BITO's appeals is its dividend. That was nearly 100% earlier this year on a TTM basis but has fallen since the 2026 distributions were cut. A high yield was not the primary function of the fund. It was simply a by-product of distributing the profits - if any - from futures-related gains, a requisite for tax reasons. BITO did not advertise itself as an income fund, but it sure looked like one from a distance, and a 60-90% yield drew in investors. Data by YCharts Those juicy distributions came with a warning - There is no guarantee that dividends or interest income will be paid. But the good times continued until 2026 despite some hefty Bitcoin falls. As it happens, there is no direct link between a monthly Bitcoin gain or loss and the subsequent monthly distribution. Indeed, BITO kept its distributions consistently high no matter what happened to Bitcoin until this year. That is made clear by the divergence between total return and BITO price. Data by YCharts Prices have underperformed total return because the fund paid out more than it gained. That would usually be called "Return of Capital," but that's not what ProShares classifies it as, likely because the underlying holdings are futures contracts and swaps. The chart above also highlights that the total return/price divergence only started in 2024. I can't find any documentation on why this happened, but I think it relates to regulatory changes. The newer Bitcoin ETFs were all launched in early 2024 around the same time BITO seemed to change its distribution policy. What Happened to Distributions in 2026? As shown earlier, the 2026 distributions suddenly dropped substantially. The April payout was only $0.0061, which is less than 1% of the December 2025 payout of $0.7432. The only change that I can see in 2026 is that the tax year dates were slightly changed. As per the ProShares site: What are the changes to note for the Crypto Funds in 2026? Due to a tax provision included in the One Big Beautiful Bill Act (OBBBA), the Crypto Funds’ subsidiaries’ tax year-end will change from September 30 to October 31. As part of this transition, the subsidiaries will have two net income periods in 2026. The current tax year will end on September 30th. October will be a completely new and independent period, and in November, the 2027 tax year will start. BITO has to pay out all profits by the end of the tax year, but I don't see why the slight changes to the dates would affect its distributions so significantly. This passage is much more enlightening (highlights are mine): The amount of each Fund’s monthly dividend distribution (if any) is intended to estimate the Fund’s current required calendar year distribution allocated equally over the remaining months of the calendar year... It is important to remember that the dividend distribution amount for each Fund may change significantly from month to month. In some months, a Fund may not make any dividend distributions at all. For example, a Fund may not make distributions if its subsidiary has had significant recent losses or if the distributions previously paid by the Fund have already covered the Fund’s expected required calendar-year dividend distribution. At the start of the current tax year in 2025, BITO made four large distributions at the end of 2025 of between $0.74 and $0.83 each. They were extremely generous given Bitcoin's performance and dragged down the fund's NAV. It seems the fund curbed the rest of the distributions, and since the 1-year Bitcoin performance is -27% since September 2025 all distributions, even the small ones, have eroded NAV. BITO has not bumped up its distributions in the last two months despite the recovery in Bitcoin because BITO considers the whole tax year when calculating dividends. Distributions Could Increase Again Next Month Now that a new tax year is about to start, BITO could boost its distributions in expectation of Bitcoin gains throughout the year. Even a conservative estimate would be for 10-20% gains in Bitcoin, and if those gains don't happen, it would just mean the distribution is cut again in the coming months, like last time. I doubt the payout will be anything like the 2025 distributions, as the fund seems to be cautious about NAV erosion, but the recent recovery in Bitcoin should encourage higher payouts than the tiny ones earlier in 2026. If we annualize the total 2026 distribution so far of $0.0892, it comes to less than 1%, which is too low. BITO will surely want to keep remaining investors happy with a little more. All that said, does it really matter? With such a variable and unreliable distribution, BITO cannot be treated as an income fund, although I'm sure many investors initially thought it could be when they saw the consistent high distributions in 2024 and 2025. A distribution boost may bolster sentiment, but if it is cut again in 2027 because Bitcoin declines, the happiness will be short-lived. Bitcoin Outlook As already mentioned, BITO is a poor way to gain Bitcoin exposure as it significantly underperforms newer ETFs. In the rare case you want to avoid holding any Bitcoin whatsoever, it may have a use, and if Bitcoin rallies significantly, then BITO will follow. The problem is that the Bitcoin outlook is not yet bullish despite its recent rally. My last article in April highlighted a head and shoulders pattern and speculated it could recover to test the neckline around $85 thousand. That's pretty much what happened in recent months. TradingView The outlook is more neutral than bullish or bearish, and making higher lows on the next drop would swing it bullish. Conclusions BITO distributions in 2026 have been tiny, running at around 1% annualized. This is because of the significant distributions earlier in the 2026 tax year and the negative performance of Bitcoin. A new tax year is due to start in October, and I expect the distributions could make a hefty jump in expectations of a better Bitcoin performance in the year ahead. However, any dividend hike could be short-term and is meaningless as it is plainly evident future payouts could be cut, and BITO cannot be treated like an income fund. Furthermore, its underperformance compared to IBIT and other newer ETFs makes it a poor way to gain long-term Bitcoin exposure. I still rate BITO a strong sell.
