Crypto Investing Enters New Territory
Structured Protection ETFs: A Game-Changer for Bitcoin Investors
The world of cryptocurrency investing is about to get a whole lot more interesting. Asset management firms are now combining crypto and derivatives in exchange-traded packages, offering investors a new way to tap into bitcoin’s potential while managing risk. This month, Calamos will launch a structured protection ETF that provides 100% downside protection while capturing some of bitcoin’s upside.
A New Era of Diversification
Defined outcome products, including buffer funds, have gained popularity in recent years as investors seek to diversify their portfolios. The 2022 market sell-off, which saw both stocks and bonds decline, accelerated their adoption. Now, with the launch of spot bitcoin funds last January, investors are eager to explore new ways to invest in crypto.
Calamos’ Innovative Approach
Calamos’ new ETF combines options exposure on the Cboe Bitcoin U.S. ETF Index with Treasury holdings, designed to be held for 12 months. The fund’s upside cap will be determined on January 22, based on options pricing. This innovative approach brings a popular equity ETF strategy to crypto investing, offering investors a risk-managed framework for accessing the bitcoin market.
Winning Over Financial Advisors
According to Calamos Head of ETFs Matt Kaufman, financial advisors have been hesitant to invest in bitcoin due to its volatility history. However, structured funds like Calamos’ can win them over by providing a more controlled risk environment. Kaufman believes investors will hold the Calamos fund alongside pure-play bitcoin ETFs, creating a diversified crypto portfolio.
A Growing Trend
Calamos is not alone in its efforts to marry crypto exposure with other popular fund styles. Innovator and First Trust have also filed to launch similar funds, while firms like Grayscale and Roundhill are exploring income-generating strategies. With a more crypto-friendly Securities and Exchange Commission expected under President-elect Donald Trump, the floodgates may open for new funds in 2025.
Understanding the Risks
Investors should be aware that the Calamos fund is designed to be held for a 12-month period. Selling the fund early may result in less than expected gains from a bitcoin rally or even losses. Additionally, the structure of bitcoin products will likely differ from traditional buffer funds due to crypto’s unique volatility profile.
The Future of Crypto Investing
As the options market grows alongside these new funds, investors will have more opportunities to tap into bitcoin’s potential. With liquidity issues affecting leverage funds tied to MicroStrategy, a proxy for bitcoin, the success of these new products will depend on the development of a robust options market. Calamos’ Kaufman is confident about the capacity of the options market, paving the way for a new era of crypto investing.
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