‘Protected’ Bitcoin ETFs Hitting the Market—Here’s What That Means

Bitcoin’s price has been a roller coaster ride for investors for 15 years, but a new batch of Bitcoin ETFs will seek to replace the asset’s stomach-churning free falls with relatively modest declines—or none at all.

Calamos’ first “Protected Bitcoin ETF” will hit the market Wednesday, offering investors 100% downside protection against Bitcoin’s price with limited upside potential.

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

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

Calamos’ ETFs will be listed on the Cboe, with its 100% Protected Bitcoin ETF set to debut at a price of $25 Wednesday. The product’s so-called cap range, expected to be anywhere between 10% to 11.5%, will be struck at the end of the day. From that point on, the ETF will aim to offer 100% downside protection against Bitcoin’s price, with a cap range struck again next year.

Spot Bitcoin ETFs debuted in the U.S. last year, notching $36.2 billion worth of net inflows as investors and traders flocked to products from Wall Street giants like Fidelity and BlackRock. Since then, Bitcoin’s price has climbed 133% from $46,000 to nearly $107,000, yet some analysts say that registered investment advisors and wirehouses are still warming up to such products.

Among institutional investors, 48% of those surveyed in 2023 said that digital assets’ price volatility was a considerable obstacle from an investment standpoint—citing that factor more than anything else, according to a Fidelity Digital Assets report. Meanwhile, 22% of respondents pointed to self-custody concerns, which spot ETFs largely availed.

In two weeks, Calamos—which was founded in 1977—will launch additional ETFs with 80% and 90% downside protection against Bitcoin. Those 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 U.S. Treasuries and flex options on the CBOE Bitcoin US ETF Index, according to Calamos’ website. Flex options are essentially customizable exchange-listed options, which can have a one-year outcome period, as opposed to expiring on the final Friday of each month, Kaufman said.

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

Though the products could find use among a professional investment crowd, Kaufman posited that the products could also cater to investors beyond the typical age of your typical crypto bro.

“The adoption for Bitcoin has been on the individual or retail level, and it’s largely been people younger than myself,” the 45-year-old Kaufman said. “We haven’t seen too much of the adoption curve from those older investors, largely because of the risk tolerance that they just can’t take.”

Edited by Andrew Hayward