Asset managers in US propose new Bitcoin ETFs to target cautious investors

Asset managers are turning to new derivative-based Bitcoin ETFs to help cautious investors navigate the cryptocurrency’s notorious price swings.

US asset managers have submitted plans to regulators to launch Bitcoin (BTC) exchange-traded funds that use derivatives to eliminate or at least minimize potential losses in a bid to attract cautious investors looking to enter the crypto market with lower risk.

The proposals include a range of “buffered” and “managed basis” strategies, which reduce risks by protecting investors from big losses but limit the amount of profit they can make, according to a Financial Times report on Monday (December 2).

The report states that Calamos Investments, First Trust Portfolios, Innovator ETFs and Grayscale Investments are among the companies seeking green light from the US Securities and Exchange Commission. While each firm plans to offer products that use buffered or managed floor strategies to protect against losses of up to 30%, some also offer covered call ETFs or leveraged variations.

Todd Rosenbluth, head of research at TMX VettaFi, added that the move is likely tied to many investors’ desire to participate in the market “given the meteoric rise in Bitcoin this year” and that downside protection ETFs “will allow more people to add Bitcoin to their risk-sensitive portfolios.” “They’re putting it at risk in some way.”

The report states that new products could be launched in early February if approved by the SEC, but position limits in option contracts may create difficulties for funds, especially if demand exceeds existing capacity.

The filings follow a significant shift in the ETF market, with Ethereum (ETH) spot ETFs recently outperforming Bitcoin ETFs for the first time, recording single-day inflows of $332.92 million. Ethereum also gained over 3% during this period, while Bitcoin’s price saw little change.