Asset managers are turning to new derivatives-based Bitcoin ETFs to help cautious investors navigate the crypto’s notorious price swings.
U.S. asset managers have filed plans with regulators to launch Bitcoin (BTC) exchange-traded funds that use derivatives to eliminate or at least minimize potential losses in an effort to attract cautious investors seeking exposure to the crypto market with reduced risk.
According to a Financial Times report on Monday, Dec. 2, the proposals include a range of “buffered” and “managed floor” strategies, which reduce risks by protecting investors from big losses but limit how much profit they can make.
Calamos Investments, First Trust Portfolios, Innovator ETFs, and Grayscale Investments are among the firms seeking the green light from the U.S. Securities and Exchange Commission, the report reads. Each firm plans to offer products using buffered or managed floor strategies to protect against losses of up to 30%, while some also propose covered call ETFs or leveraged variations.
Todd Rosenbluth, head of research at TMX VettaFi, says the move is likely tied to the desire of many investors to join the market “given the meteoric rise in Bitcoin this year,” adding that downside protection ETFs “will allow more people to add Bitcoin exposure to their portfolios in a risk-aware manner.”
The new products could launch as early as February if approved by the SEC, though position limits on options contracts could pose challenges for the funds, particularly if demand exceeds current capacity, the report adds.
The filings follow a significant shift in the ETF market as Ethereum (ETH) spot ETFs recently recorded a $332.92 million single-day inflow, surpassing Bitcoin ETFs for the first time. Ethereum also gained over 3% during the period, while Bitcoin’s price saw minimal change.
