Anadolu | Anadolu | Getty Images
Bitcoin ETFs were a hit among investors in 2024, and now asset management firms are starting to develop ways to combine cryptocurrencies and derivatives into exchange-traded packages.
The new products are scheduled to be launched this month. Asset manager Calamos announced on Monday that it would launch the platform structured ETF protection fund which aims to allow investors to capture some of the advantages of bitcoin while being 100% protected from the disadvantages.
The fund will combine exposure to options on the Cboe Bitcoin US ETF Index with Treasury investments and is expected to be held for 12 months. The exact upper limit will be determined on January 22 based on option prices. It will be listed under the ticker CBOJ.
The fund essentially brings the popular equity ETF strategy to cryptocurrency investing. Defined deliverables incl buffer fundshave been booming in recent years as investors look for new ways to diversify their portfolios. Their rise in popularity was apparently helped by the market sell-off in 2022, when stocks and bonds fell.
Bitcoin Spot Funds launched in January 2024 and had arguably the best ETF debut in history. These funds have combined to raise tens of billions of dollars and have helped fuel Bitcoin's rise record high, over $100,000.
Bitcoin has surged since the approval of ETFs tracking the cryptocurrency last January.
Cryptocurrency inflows and rally pushed iShares Bitcoin Trust ETF (IBIT)the most popular fund, with total assets exceeding USD 50 billion.
But Matt Kaufman, head of ETFs at Calamos, said his team believes financial advisors continue to largely avoid bitcoin because of its history of volatility and that these structured funds could win them over.
“People who want to access this space want to do it on a managed risk basis or on something that makes a little more sense for their portfolio,” Kaufman said. He also believes investors will hold the Calamos fund in combination with pure-play bitcoin ETFs.
Calamos isn't the only ETF manager working to combine cryptocurrency exposure with other popular fund styles.
Innovator AND First trust are two other ETF issuers that have applied to launch funds with strategies similar to Calamos's. Companies are also trying to combine bitcoin with income-generating strategies, including proposed call funds from issuers such as Grayscale AND Roundhill.
More funding is likely to be filed throughout 2025, particularly with the Securities and Exchange Commission, which is expected to become more friendly to cryptocurrencies under the president-elect Donald Trump.
How it works
The Calamos Fund is to be maintained for a period of 12 months. The stated holding period is January 22, 2025 – January 31, 2026. Because bitcoin exposure is built through options that change in price as the expiration date approaches, it is possible that investors who sell the fund early will receive less than expected profit from the growth of bitcoins, or may even incur a loss.
Calamos Bitcoin Structured Alt Protection ETF – January
| Heart | Holding period | Protection against defect Purpose | Annual fee |
|---|---|---|---|
| CBOJ | 22/01/2025-31/01/2026 | 100% | 0.69% |
Source: Reeds
Calamos also plans to launch “floor” funds that offer 90% and 80% bitcoin protection, allowing for initial losses in exchange for greater growth.
Kaufman said the structure of working bitcoin products will likely look different than traditional buffer funds, which protect against the first specified percentage loss due to the volatility of cryptocurrencies.
“If you look at the S&P 500 returns, it looks like a normal bell curve distribution. If you look at the distribution of returns on bitcoin, it looks more like a smile. It's all left tail or far right tail risk up. So if you build a buffer, you're not really protecting against anything,” Kaufman said.
Another thing worth watching is how the options market grows with funds. Options linked to Bitcoin ETFs only began to be introduced to the market at the end of 2024. Option liquidity issues negatively impacted results leveraged funds linked to MicroStrategywhich is often seen as a proxy server for bitcoin.
“We don't have any performance concerns,” Kaufman said of the options market for Calamos funds.