By Staff Reporter
A new exchange-traded fund (ETF) launched by global investment management firm Calamos aims to safeguard investors from Bitcoin’s price volatility. The ETF hit the market on Wednesday.
CBOJ stands out as the first of three ETFs, offering 100% downside protection while providing an attractive upside potential of 10% to 11.5% over a one-year horizon, according to a recent press release. A Calamos representative informed CoinDesk that as of 12:11 p.m. ET, approximately 635,714 shares of the ETF had already traded.
In addition to CBOJ, Calamos plans to roll out two more funds, CBXJ and CBTJ, on February 4. These funds will offer 90% and 80% downside protection, respectively, with capped upsides ranging from 28% to 30% and 50% to 55%.
The new Bitcoin ETF from Calamos achieves downside protection by investing in U.S. Treasuries and options on Bitcoin index derivatives. Each year, the upside cap is reset, providing investors with fresh terms for potential gains.
For instance, if an investor purchases $100 worth of ETF shares, Calamos allocates a portion of that investment into Treasury bonds, which are designed to grow back to $100 over one year. This guarantees that, regardless of Bitcoin’s market price fluctuations, the investor retains the full $100.
The remaining funds are utilized to acquire options linked to Bitcoin’s price, offering investors exposure to the cryptocurrency without direct ownership.
While this safety net offers valuable protection, it comes at a cost. The management fee for these ETFs is set at 0.69%, which is higher than many other Bitcoin-focused ETFs. The average fee for U.S.-based ETFs hovers around 0.51%, making Calamos’s offerings slightly pricier for investors. However, for those prioritizing safety in the volatile digital asset market, this higher fee may be a worthwhile investment.
As “Bitcoin maxis” and other crypto enthusiasts champion the long-term value of Bitcoin, many traditional institutional investors remain cautious, citing concerns over Bitcoin’s volatility and instances of severe price declines.
In response to these concerns, exchange-traded funds (ETFs) designed to protect against downside risk have emerged as a popular innovation among issuers in recent months. This trend coincides with the upcoming inauguration of crypto-friendly President Donald Trump, raising hopes that many ETF applications will gain approval from the Securities and Exchange Commission.
In October, crypto asset manager Bitwise took proactive steps by revamping three of its futures-based crypto ETFs. These updated funds now include exposure to U.S. Treasuries, providing a safety net against potential crypto price drops. The strategy involves rotating investments between cryptocurrencies and Treasuries based on market signals, aiming to balance risk and reward for investors.
