Bitcoin's remarkable surge is prompting investors to re-evaluate their strategies. While the allure of amplified returns through leveraged ETFs like the 2x Bitcoin Strategy ETF (BITX) and the ProShares Ultra Bitcoin ETF (BITU) is strong, the actual bitcoin price is arguably a better, less risky play. Demand for these investment vehicles is soaring as the digital asset hits record highs, with BITX already seeing an incredible 124% gain since the start of the year, just over double the 61% gain that BITO, the Bitcoin futures ETF designed to mimic the spot price of bitcoin, has experienced.

Leveraged futures and leveraged ETFs offer increased exposure, but come with significant downsides. BITX risks are substantial. A 2X leveraged ETF tied to the notoriously volatile Bitcoin cyber-currency will inherently have a lot of price fluctuation. Investors are currently pouring hundreds of millions of dollars into these ETFs that tout 2x leveraged exposure to Bitcoin’s price movements, believing they can quickly multiply their gains. But is this the wisest approach?

BITX and BITU are attracting inflows, according to ETF.com data, with over $1.4 billion invested. However, seasoned investors understand that leveraged ETFs are not designed for long-term holding. The daily rebalancing inherent in their structure can lead to significant value erosion over time, especially in volatile markets.

So, what's the takeaway? While the gains from BITX and BITU might seem tempting, directly investing in Bitcoin or opting for ETFs like BITO, which tracks the spot price more closely, may prove to be a more prudent and less risky strategy in the long run. Before jumping into leveraged bitcoin ETFs, carefully consider your risk tolerance and investment horizon. Savvy investors might even consider exploring crypto futures directly, understanding the nuances of leverage without the daily decay associated with leveraged ETFs.