TLDR: We are currently losing 10% per year to withholding taxes for "dividends" from BITO, which are not profits from futures rollover.
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If you were like me, holding BITO and gotten dividends since 1 Feb 2023, and every month after that (today is 1 June), you might have been pleasantly surprised with the dividends. You may have thought that it was backwardation and pure profits.
Sad to say, nothing is further from the truth. Not only do you NOT have profits, your dividends are TAXED. Let me explain:
1. Assume we hold 1 BITO
2. For Feb, Mar, Apr, May, June, we have a total of $1.56 of dividends
3. We have paid withholding taxes of 30% (in my jurisdiction)
4. The total dividends amount to about 10% of BITO price (averaging about $15.50 between Feb and Jun)
Now look at the chart of BITO/BTCUSD -
1. BITO has effectively fallen 10% from the BTCUSD peg
What this means:
1. There was ZERO real profits from futures rollover
2. There was "profit" from rollover, but the BTC peg was unhinged by the same amount
3. Dividends were distributed, and if they could be manually compounded, it would be OK
4. But THEY ARE TAXED!
Result:
1. The holdings of BITO are not 1:1 with BTC
2. They have LOST 3% over the past 3 (mainly Apr, May, Jun) dividend distributions
3. At this rate, we lose 10% a year to Taxes