“Protected” Bitcoin ETFs Coming to Market: Here’s What It Means

BitcoinBitcoin’s price has been a roller coaster for investors for 15 years, but a new batch of Bitcoin ETFs will seek to replace the asset’s free falls with relatively modest declines, if any.

Calamos’ first “Protected Bitcoin ETF” will launch to the market on Wednesday, providing investors with 100% protection against a decline in the price of Bitcoin with limited upside potential.

From retail investors to financial advisors, Bitcoin’s risk profile has deterred a notable number of market participants who might be wary of Bitcoin’s steep declines despite its growing adoption, said Matt Kaufman, Calamos’ head of ETFs. Decrypt.

“Calamos built exposure to Bitcoin with a safety net, and you can choose how far that safety net goes,” he said. “Bitcoin is a historically extremely volatile asset, and so many people have sat on the sidelines watching this experiment turn into an institutional reality.”

Calamos’ ETFs will be listed on Cboe, and its 100% hedged Bitcoin ETF is expected to debut at $25 on Wednesday. The product’s cap range, which is expected to be between 10% and 11.5%, will be reached at the end of the day. From that point on, the ETF will aim to provide 100% protection against Bitcoin’s price decline, with a new cap range next year.

Spot Bitcoin ETFs debuted in the United States last year, seeing $36.2 billion in net inflows from investors and traders. flocked to products from Wall Street giants like Fidelity and BlackRock. Since then, the price of Bitcoin has soared 133%, from $46,000 to almost $107,000Again some analysts say that registered investment advisors and data transfer companies are still preparing for such products.

Among institutional investors, 48% of those surveyed in 2023 said that digital asset price volatility was a significant barrier from an investment perspective – citing this factor more than anything else, according to a Fidelity Digital Assets study. report. Meanwhile, 22% of respondents highlighted self-guard concerns, from which spot ETFs have benefited greatly.

In two weeks, Calamos, founded in 1977, will launch additional ETFs with 80% and 90% downside protection against Bitcoin. These products will have an estimated cap range of 28% to 31% and 50% to 55%, respectively.

The products’ risk management framework will be achieved through a combination of US Treasuries and flexible options on the CBOE Bitcoin US ETF, according to Calamos. website. Flexible options are essentially customizable, publicly traded options that can have a one-year outcome period, instead of expiring on the last Friday of each month, Kaufman said.

Calamos, which manages $40 billion in assets, launched similar products covering the S&P 500 and Nasdaq-100 last year.

While the products could be used by a professional investor audience, Kaufman posited that the products could also be aimed at investors beyond the typical age of your typical crypto sibling.

“Bitcoin adoption has been at the individual or retail level, and a lot of it has been people younger than me,” Kaufman, 45, said. “We haven’t seen much of an adoption curve from these older investors, largely because of the risk tolerance that they just can’t accept.”

Edited by Andrew Hayward