This post was originally published on this site.
The sharp decline in Bitcoin’s price over the past year has triggered steep losses for Israeli exchange-traded funds (ETFs) designed to track the cryptocurrency. These local tracker funds have posted losses of approximately 30% over the last 12 months, underperforming both Bitcoin itself, which fell 24.4%, and the benchmark BlackRock Bitcoin ETF, which declined 23.1% over the same period.
This roughly 6% gap in underperformance is attributed primarily to foreign exchange fluctuations. Specifically, the weakening of the U.S. dollar against the Israeli shekel has amplified losses for local investors in shekel-denominated funds, as the value of their dollar-based assets eroded when converted back into local currency.
Launched in early 2025, the Israeli Bitcoin tracker funds generally do not hold Bitcoin directly. Instead, they gain exposure by purchasing futures contracts or investing in foreign Bitcoin-linked ETFs. These investments are made after converting investor capital from shekels to dollars. As a result, fund performance is driven by two factors: the change in Bitcoin’s price and movements in the USD/ILS exchange rate, exposing investors to a “double whammy” in recent months.
Six Israeli asset managers — Mor, Migdal, Kesem, IBI, Meitav and Ayalon (which offers an actively managed crypto fund) — have launched such products. Yet nearly a year after their rollout, the total assets under management amount to just 200 million shekels (about $64 million), with recent months seeing net outflows amid the crypto downturn.
The relatively small scale of these funds stands in contrast to the widespread retail interest in Bitcoin among Israeli investors. According to a Calcalist analysis of investor behavior, Bitcoin is among the most popular retail holdings, with local clients holding billions of shekels’ worth of exposure through U.S.-listed ETFs.
At Meitav Trade, for example, BlackRock’s IBIT ranks among the top five holdings among retail clients. The same trend is observed at IBI, Israel’s second-largest brokerage, where IBIT is also one of the five most-held assets among clients trading U.S. markets.
An explanation for the gap between Bitcoin’s widespread popularity among Israeli retail investors and the modest assets under management in locally listed Bitcoin funds may lie in investor behavior: private investors appear more comfortable gaining exposure via foreign-listed ETFs that track the cryptocurrency directly. Additionally, the timing of Israeli fund launches, during a period of negative momentum for Bitcoin in 2025, likely deterred potential inflows.
Compounding the challenge, these are new products without sufficient track records to be ranked by local banks, leaving them off the radar of investment advisors and their clients.
Publicly traded Israeli firms with exposure to Bitcoin also suffered a dismal year on the Tel Aviv Stock Exchange. Zuz Strategy, which has positioned itself as “Israel’s MicroStrategy” by focusing on the accumulation and long-term holding of Bitcoin, currently trades at a market cap of approximately 230 million shekels. Over the past 12 months, the company’s valuation has plunged by 81%. Last year, Zuz completed a private placement of $180 million to qualified institutions, with a declared intention to allocate around 95% of the proceeds to Bitcoin purchases.
Another casualty is Silver Castle, a crypto-focused investment house that went public in 2022 and has since lost about 99% of its market value. Control of the firm was recently sold to investment house IBI for just 10 million shekels, and its current market capitalization stands at roughly 8 million shekels.
Tectona, a blockchain and digital asset company, has also seen its valuation drop by 43% over the past year, leaving it with a market cap of 86 million shekels, even as the broader TA SME index gained 33% during the same period.
Overall, Bitcoin has shed approximately 36% of its value since peaking in October 2025. The decline is attributed to a mix of macroeconomic and geopolitical factors, most notably expectations of prolonged high interest rates in the United States.
Attorney Zahi Zach, head of crypto at Amit, Pollak, Matalon, said that while volatility is inherent to Bitcoin, the recent downturn reflects a confluence of unusual headwinds, including uncertainty over the next Federal Reserve chair.
“There are both economic and political drivers—persistent rate hikes, market anxiety, and the appointment of Kevin Warsh as the next Fed chair,” Zach explained. “Warsh is seen as a conservative figure, with a mixed record on crypto. Regulatory conservatism generally spells trouble for the digital asset space.”
Zach added that a key disappointment among investors has been the failure to implement a dedicated regulatory framework for crypto. “There was an expectation that the U.S. would create new crypto-specific regulation to distinguish which digital assets require oversight, rather than relying on outdated financial laws. That hasn’t materialized. Instead, the SEC has focused primarily on regulating stablecoins.”
He concluded that crypto, at its core, is still a narrative-driven asset class: “It needs a constant stream of new believers. There was hope that Gen Z would fuel mass adoption, but that’s only happened partially. Meanwhile, we’re also seeing forced selling by leveraged investors as collateral values fall, a pattern familiar from previous crypto market crashes.”
Or Poria, chairman of Poria Finance, believes Bitcoin has no intrinsic value. “There’s no way to price it. It’s backed by neither an economy nor a sovereign state. In fact, it was the only major asset to post a decline throughout 2025, a year when the U.S. president is Donald Trump, who is seen as crypto-friendly,” he said.
“Because Bitcoin didn’t rally, some of its advocates started framing it as a hedge against equities — the so-called ‘new gold.’ But when markets turned south, Bitcoin tumbled too. Bonds offer interest. Stocks belong to companies with measurable growth. Bitcoin is simply a purchase based on the hope that its price will rise. I genuinely don’t see why an investor would seek exposure to an intangible asset.”
So why does a Bitcoin ETF remain one of the top five holdings among retail investors in Israel? “The notion that retail investors are fully informed or have superior control over their portfolios is flawed,” Poria said. “Investment management is a profession. There are better portfolio managers out there, and institutional investors still offer added value. A young investor who opened a trading account and thinks Bitcoin is ‘cool’ is not a substitute.”
Attorney and blockchain entrepreneur Ron Gal offered a different perspective. “We’re currently in an exceptionally turbulent period — both politically and economically,” he noted. “In such times of heightened uncertainty, we’re seeing institutions and even governments shift capital toward perceived safe havens like gold, at the expense of more volatile assets such as cryptocurrencies.”
Gal added that while Bitcoin tends to rally during periods of growth and is still widely viewed as speculative, it is increasingly gaining legitimacy as an investment vehicle, particularly during times when investors have surplus capital to deploy.