New ETFs Aimed at Risk Reduction
U.S. asset managers have proposed launching new Bitcoin ETFs based on derivatives to protect investors from the high volatility of cryptocurrencies. These funds aim to minimize potential losses and attract cautious investors looking for exposure to the crypto market with reduced risk.
Protective Strategies: "Buffer" and "Controlled Floor"
According to a report by Financial Times, the proposals include various protective strategies, such as:
Buffer strategies: Protect investors from significant losses.Controlled floors: Reduce risk while capping maximum potential gains.
Firms like Calamos Investments, First Trust Portfolios, Innovator ETF, and Grayscale Investments have submitted proposals to the U.S. Securities and Exchange Commission (SEC). They plan to offer products with protection against losses of up to 30%, while some also propose covered call ETFs or leveraged variations.
Responding to Growing Bitcoin Interest
Todd Rosenbluth of TMX VettaFi suggests that this move is a response to increasing investor interest, driven by Bitcoin's meteoric rise this year. "Downside-protection ETFs will allow more people to add Bitcoin exposure to their portfolios in a risk-aware way," Rosenbluth said.
If approved, the new products could launch as early as February. However, position limits on options contracts could pose challenges for these funds, especially if demand exceeds current capacity.
Ethereum ETFs Surpass Bitcoin ETFs
The proposals come amid a significant shift in the ETF market. Recently, Ethereum spot ETFs recorded a one-day inflow of $332.92 million, surpassing Bitcoin ETFs for the first time. During this period, Ethereum gained over 3%, while Bitcoin's price remained relatively unchanged.
These new ETFs could provide safer entry points for investors looking to gain exposure to cryptocurrencies and enhance liquidity in the Bitcoin ETF market.
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