U.S. Asset Managers Propose New Bitcoin ETFs Aimed at Risk-Averse Investors

Leading U.S. asset management firms are seeking regulatory approval for innovative Bitcoin exchange-traded funds (ETFs) designed to provide cautious investors with exposure to cryptocurrency while mitigating potential losses.

Bitcoin ETFs with Risk Management Strategies

According to a report by Financial Times on Dec. 2, these proposed ETFs employ derivatives-based strategies such as “buffered” and “managed floor” models. These approaches aim to shield investors from significant price swings by offering protection against losses of up to 30%. However, this protection comes with capped profit potential, reflecting a trade-off between risk and reward.

Firms Behind the Proposals

Prominent firms including Calamos Investments, First Trust Portfolios, Innovator ETFs, and Grayscale Investments have submitted filings to the U.S. Securities and Exchange Commission (SEC). Some of the proposed products also include covered call strategies and leveraged options, catering to a diverse range of investment preferences.

Expert Insights

Todd Rosenbluth, head of research at TMX VettaFi, believes these ETFs could appeal to investors drawn to Bitcoin’s meteoric rise this year. He explained, “Downside protection ETFs will allow more people to add Bitcoin exposure to their portfolios in a risk-aware manner.”

Potential Launch Timeline and Challenges

If approved, these ETFs could debut as early as February 2025. However, analysts caution that position limits on options contracts might restrict the funds’ scalability, particularly if demand outpaces existing capacity.

Shift in the ETF Market

The filings come amid notable changes in the crypto ETF landscape. Ethereum spot ETFs recently recorded a $332.92 million single-day inflow, surpassing Bitcoin ETFs in performance for the first time. During the same period, Ethereum’s price gained over 3%, while Bitcoin’s price remained relatively stable.

Conclusion

The introduction of risk-managed Bitcoin ETFs represents a significant step in broadening access to cryptocurrency investments. By addressing the volatility concerns of cautious investors, these products could help bridge the gap between traditional finance and the rapidly evolving crypto market.