We all know that Bitcoin has surged in value. And we know that many investors, even including millionaires, have missed the Bitcoin boat after Bitcoin went over $100,000. Well, maybe. What if you could buy Bitcoin without taking any of the price risk?
There is an ETF strategy for just about anything — and that now includes being able to buy an ETF that offers downside protection to eliminate most of the price risks if Bitcoin crashes. It is quite possible that some “Bitcoin Bulls” will adopt a strategic approach here and use this first downside protection ETF as a money market alternative rather than holding cash accounts.
A new group of Bitcoin ETFs is coming from the Calamos Protected Bitcoin ETFs. These ETFs are created to provide upside exposure to the price of Bitcoin with specific levels of downside protection over an outcome period. As there is downside protection, there are also price caps that will be tied to each ETF. The firm noted: the lower the protection level, the higher the upside opportunity.
Calamos is a seasoned investment manager with closed-end funds and ETFs that now claims more than $40 billion in assets under management, which includes over $18 billion in liquid alternatives assets as of December 31, 2024.
The ETFs will initially use a combination of Treasuries and options on the CBOE Bitcoin US ETF Index to access bitcoin within a risk-controlled framework.
The Calamos Bitcoin Structured Alt Protection ETF – January (CBOJ) launched on January 22 at $25.00 per share. This ETF offers upside potential to bitcoin to a cap with 100% downside. It traded over 1 million shares on day-one and the trading volume has been coming down since. The release noted the additional ETFs which will be coming soon. The CBOJ statement explained:
CBOJ will commence trading on 1/22/25 at a $25 NAV, which will allow investors to obtain 100% protection relative to bitcoin over the outcome period. CBOJ will then strike the final cap rate toward the end of the trading day on 1/22. This innovative approach to buying structured outcome ETFs allows investors to buy-in on day one and obtain the stated protection level (e.g., 100%, 90% or 80%) without being exposed to the overnight volatility of bitcoin, which could otherwise impact the protection level achieved. CBXJ and CBTJ will follow a similar approach.
Each additional ETF will have targeted cap ranges as follows:
CBOJ with 100% downside protection and an estimated cap range of 10%-11.5%
CBXJ with 90% downside protection and an estimated cap range of 28%-31%
CBTJ with 80% downside protection and an estimated cap range of 50%-55%
What will be interesting to see is whether or not investors really do start to use CBOJ as a “money market alternative” since it has 100% downside protection. While that would cap the gains out at 10% to 11.5%, it does leave a floor of a 0% return over the course of a year. Many investors have their funds in cash accounts that pay little to no interest as is, even though money market rates should be 4% and higher.
