Research firm 10x Research has sharply criticized BlackRock's new exchange-traded fund — the iShares Bitcoin Premium Income ETF (BITA). In the analysts' view, the fund is poorly designed: in almost any scenario investors will either lose to simply holding bitcoin (BTC) or receive a weak absolute return.

BITA launched on the Nasdaq exchange and uses a covered call strategy: the fund holds bitcoin and shares of BlackRock's flagship IBIT fund, and then sells options on part of these positions in order to generate monthly income for investors. 10x Research contrasted this approach with its own strategy presented in a report from May 12.

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What the 10x Research complaints are about

By the analysts' estimate, bitcoin's elevated volatility is structural in nature. It is fueled by the inequality of access to information among market participants and a culture of aggressive marketing that financial regulators would not have tolerated in other fields.

Researchers noted that many systematic players have tried to earn on this volatility, but most have failed. In its May report, 10x Research estimated that bitcoin investors miss out on around $7 billion in potential income each year. BITA was created as a response to this demand, but, in the company's view, at almost every key point its creators have doomed their adherents to contrary and incorrect decisions.

When selling options is justified

10x Research analysts identified three conditions under which it is profitable to sell call options on bitcoin. If all three coincide, such a sale turns into a trade with high chances of success. If not, it is wiser not to sell at all and to keep for oneself the ability to earn on a price increase.

Whoever sells options without these conditions, according to the company, does not earn income but «parts in advance with the upside potential». This, in 10x Research's view, is exactly what BITA does and gives up every month — and that is what undermines the fund's structure.

Source: BeInCrypto