The new BlackRock BITA ETF has been thoroughly criticized: the fund's strategy has been deemed a failure.
Analysts at 10x Research have harshly criticized BlackRock's new exchange-traded fund, the iShares Bitcoin Premium Income ETF (BITA). According to their assessment, the product's structure is so flawed that in the vast majority of scenarios, investors either lose out to simply holding bitcoin (BTC) or achieve negligible absolute returns. This is not just an opinion—it is a detailed breakdown of fundamental errors in the fund's design.
BITA, which trades on the Nasdaq, employs a covered call option strategy. The fund holds bitcoin and shares of BlackRock's flagship ETF, IBIT, and then monthly sells options on a portion of these positions, generating income for investors. At first glance, this is a classic way to profit from volatility. But, as my analysis shows, the reality is far harsher.
What is the root of the problem?
The key criticism from 10x Research is that bitcoin's heightened volatility is structural, not random. It is fueled by information asymmetry among market participants and aggressive marketing that regulators would not tolerate in traditional finance. Many have tried to systematically monetize this volatility, but most have failed.
In its May report, 10x Research estimated that bitcoin holders miss out on approximately $7 billion in potential income annually due to inefficient risk management. BITA was created as a direct response to this demand. However, according to analysts, the fund's creators made exactly the opposite and wrong decisions on virtually every key parameter.
When is selling options justified?
10x Research identified three conditions under which selling call options on bitcoin becomes a high-probability winning trade. If all three align, it is a trade with strong chances of success. If not, it is wiser not to sell options at all and preserve the potential for price appreciation.
Those who sell options without these conditions, according to analysts, do not generate income but rather "cheaply give away growth potential." This is exactly what BITA does every month, they argue—the fund's very structure requires it. Mechanical, monthly option sales without regard to market conditions is a path to guaranteed underperformance compared to simple HODLing.
In contrast, 10x Research proposes not a mechanical but a selective strategy. Options are sold not on a schedule, but only at times when all three conditions align and the odds favor the investor. The rest of the time, the fund sells nothing and retains bitcoin's full growth potential. This approach, it is claimed, allows for generating option income without sacrificing the main source of profit—the price appreciation of BTC itself.
My comment: The BITA strategy is a classic example of "financial engineering" for fees, not for the investor. Mechanical option selling on such a volatile and trending asset as bitcoin is a guaranteed way to "clip" profits in a bull market and earn a paltry premium in a bear market. BlackRock has essentially created a product that will systematically underperform the very asset it manages. Investors should think twice before paying for "yield" that turns out to be opportunity cost.