ProShares Ultra Bitcoin ETF BITU Collapses With Double Exposure Risk

Core Insights - ProShares Ultra Bitcoin ETF (BITU) aims to provide double the daily movement of Bitcoin, resulting in significant volatility and risk for investors [2][4] - The fund has experienced a 44% loss over the past month, significantly outpacing the 23% decline of the Grayscale Bitcoin Mini Trust ETF (GBTC) [2][7] - BITU utilizes a 2x leverage structure through regulated Bitcoin futures contracts, which introduces roll costs and tracking errors during periods of extreme volatility [3][4] Fund Performance - BITU launched on April 1, 2024, and currently holds $538 million in assets [3][7] - The fund's leverage resets daily, leading to amplified losses; for instance, during a recent Bitcoin drop of 14% followed by a 12% rally, BITU holders lost 8.5% [7] Market Dynamics - The recent Bitcoin selloff was exacerbated by forced liquidations from overleveraged positions, particularly among Hong Kong hedge funds [5][6] - Approximately $2 billion in leveraged positions were liquidated in a single day, contributing to the downward pressure on Bitcoin prices [5] - The macro signals to monitor include Bitcoin futures open interest and funding rates, which can indicate market sentiment and potential reversals [6]