Staking has become a popular way for crypto investors to earn passive income. You lock up your holdings to help secure a blockchain network, and in return, you earn rewards—essentially, a yield. These rewards often come from a mix of newly minted coins and transaction fees on the network.
But let’s be honest: staking altcoins isn’t for everyone. It can get complicated, it requires technical know-how, and there’s always the risk of staking on the wrong platform (RIP Celsius and BlockFi users).
For those of us who don’t have the time, patience, or inclination to dive into the altcoin rabbit hole, there’s an easier way to earn crypto-linked income: ETFs.
And no, I’m not talking about those gimmicky ETFs that just sell options on MicroStrategy Incorporated (NASDAQ:) and Coinbase (NASDAQ:). I mean ETFs that actually hold —either directly (spot) or through futures contracts—as the underlying asset.
If that sounds more your speed, here are two Bitcoin-linked ETFs that deliver high yields and passive income, paid monthly or even weekly.
ProShares Bitcoin ETF (BITO)
ProShares Bitcoin ETF (NYSE:) is a relic from the days when a spot Bitcoin ETF seemed like a pipe dream under Gary Gensler’s SEC. To navigate this, the folks at ProShares came up with a workaround: an ETF that holds futures contracts collateralized by U.S. Treasury bills.
You might be wondering how an ETF linked to Bitcoin—a non-yielding asset—manages to pay monthly distributions. The answer lies in the futures contracts. As a 1940 Act fund, BITO is required to distribute all taxable gains by the end of the year to avoid tax penalties.
These gains are realized when BITO “rolls” its futures contracts—essentially selling expiring contracts and replacing them with new ones. In addition to the futures gains, some of the distributions come from the interest earned on its Treasury collateral, essentially giving you a slice of the risk-free rate.
Currently, BITO sports a whopping 55.15% yield. While this sounds massive, it’s important to note that this yield reflects Bitcoin’s high volatility and strong performance, as realized futures gains are paid out as distributions.
So, don’t expect the yield to remain consistent—it will fluctuate based on Bitcoin’s price movements and the fund’s taxable income. ProShares warns in bad times, it could get cut altogether.
ProShares describes their managed distribution policy like this: The monthly dividend is designed to approximate the fund’s taxable income and distribute it equally over the remaining months of the year.
Simplified, the calculation considers the fund’s net investment income, subsidiary gains, and previous distributions divided over the number of months left in the calendar year.
Roundhill Bitcoin Covered Call Strategy ETF (YBTC)
The iShares Bitcoin Trust (NASDAQ:) now has an options chain, so if you want to, you could buy 100 shares and sell covered calls on them yourself. Given Bitcoin’s sky-high implied volatility, the premiums are incredibly juicy.
Or, you could just outsource the task to Roundhill Bitcoin Covered Call Strategy ETF (NYSE:), which is what I’d personally do. But note that YBTC doesn’t follow the conventional buy-write strategy where you own the underlying asset and sell calls against it. Instead, it employs a synthetic covered call strategy.
Here’s how it works: instead of holding shares of IBIT, YBTC creates a synthetic stock position by buying a call and selling a put at the same strike price and expiration. This setup mimics a leveraged long position but requires only a fraction of the capital.
Then, YBTC writes short calls against this synthetic position, effectively implementing what’s known in options trading as a “poor man’s covered call” strategy. The trade-off here is capped upside in exchange for steady income generation.
Currently, YBTC offers a 3.97% distribution yield. Like BITO, you can expect this yield to fluctuate depending on Bitcoin’s performance and volatility. But here’s where YBTC stands out: it’s one of the few ETFs to pay its distributions on a weekly basis!
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