“I think we need to add Bitcoin to our momentum baskets.”
That is what I said to Manish, knowing full well he’d say, “I hate Bitcoin. Do the research.”
So, I ran the research on including Bitcoin in our momentum work, and it appeared to add value…so, into the investable universe it went.
But how?
First, some backstory.
I’ve never understood why Bitcoin must be a religion that splits the investment community.
To some people, it’s the future of money. To others, it’s a speculative bubble destined to eventually go to zero. Neither side ever seems to waver in their view.
I don’t really care.
At Potomac, our job isn’t to decide whether Bitcoin will replace the dollar, disrupt the banking system, or become digital gold.
We don’t do narratives here. Our job is to manage money.
And when Bitcoin is demonstrating strong momentum and acting better than other opportunities available to us, we want the ability to own it.
Notice, I did not say we have a strategic allocation. I did not say, “Get off zero.” If I ever say, “To the moon,” the rest of leadership has my blessing to fire me on the spot.
Bitcoin Has to Earn Its Spot
We get our Bitcoin exposure through the ProShares Bitcoin ETF (BITO).
BITO sits within a basket of ETFs that compete for capital based on our proprietary trend and momentum scoring system.
We don't wake up and say, “We're bullish on Bitcoin, let's buy some.”
Here is what we actually do.
Our composite model serves as the broader timing mechanism. It helps determine whether the market environment is one in which we want to take risk in the first place.
The model answers this question: “Do we want to be invested?”
When BITO demonstrates stronger technical characteristics than the alternatives, it can rise through the rankings and earn an allocation.
In other words, we ask two questions:
Is this an environment where we want to own risk assets?
Is Bitcoin acting well enough to own?
No narrative required.
Why do we use BITO for Bitcoin Exposure?
There are plenty of ways to get Bitcoin exposure today, including buying Bitcoin directly, spot Bitcoin ETFs, and futures.
So why BITO?
BITO gives us an exchange-traded security rather than requiring a Potomac mutual fund to directly hold Bitcoin, establish crypto wallets, or build and operate its own Bitcoin futures program.
That matters because we manage mutual funds that operate as regulated investment companies, or RICs. Maintaining RIC status involves specific income and diversification requirements. Certain approaches to obtaining commodity or digital-asset exposure can complicate those requirements.
Source: Optuma; data from Bloomberg (Bitcoin price data, daily, through November 9, 2026); Potomac Trend Model
What's Inside BITO?
BITO isn't simply sitting on a pile of Bitcoin.
The fund seeks to provide Bitcoin exposure primarily through Bitcoin futures contracts rather than directly owning Bitcoin.
Those futures trade on the Chicago Mercantile Exchange.
To be clear, we are buying a product that trades on a regulated U.S. exchange and holds futures contracts that also trade on a regulated U.S. exchange.
Which brings us to recent news…
The Binance Hack: Price Risk vs. Custody Risk
On October 29, Binance suffered a massive security incident. According to Binance's November 3 update, approximately $6.34 billion of digital assets were impacted. The company said attackers gained unauthorized access to wallet infrastructure, while approximately $2.85 billion had subsequently been frozen or intercepted as of that update.
Price risk and custody risk are not the same thing.
BITO absolutely has price risk.
If Bitcoin gets smoked, BITO probably gets smoked too.
That's the risk we're signing up for.
We're trying to avoid taking unnecessary operational risks along with it.
We don't need to safeguard private keys. We don't need to maintain Bitcoin wallets. We don't need to decide how much cryptocurrency belongs in hot versus cold storage.
Instead, we own an exchange-traded product whose Bitcoin exposure is generated primarily through exchange-traded futures.
Does that make it risk-free?
Absolutely not.
Bitcoin can crash. Futures can deviate from spot prices. BITO can experience tracking differences. Derivatives introduce their own risks.
We know how to manage these risks.
We Don't Need to Predict Bitcoin's Future
Truthfully, we don’t think about Bitcoin’s future at all.
What we care about is the fact that it is a tradable asset that can add value to our investment process.
What matters is that we can get the exposure we want via a product that trades on a regulated exchange.
As always, we do not care about the narrative attached to this, or any, asset.
