Calamos, a global investment management firm, introduced a new exchange-traded fund (ETF) on Wednesday, designed to protect investors from bitcoin price volatility. This new offering, named CBOJ, is the first of three ETFs from the firm, each providing varying levels of downside protection.
CBOJ promises 100% protection against bitcoin’s price drops while offering a potential 10% to 11.5% upside over a one-year period. As of noon ET, the ETF traded approximately 635,714 shares. The two additional funds, CBXJ and CBTJ, are set to launch on February 4, offering 90% and 80% downside protection, respectively, with capped upside potential of 28% to 30% and 50% to 55%.
The protection is achieved by allocating portions of the fund into U.S. Treasuries and bitcoin index derivative options. The upside potential is capped annually and reset each year with new terms. Essentially, if an investor buys $100 worth of shares, a percentage of that investment goes into Treasury bonds, ensuring that, regardless of bitcoin’s price fluctuations, the investor’s $100 is preserved. The rest of the funds are used to purchase options tied to bitcoin’s performance.
However, this security comes at a higher cost. The management fee for these ETFs is 0.69%, which is above the average 0.51% fee for U.S.-based ETFs, making it a more expensive option for investors. Still, for those seeking stability in the volatile cryptocurrency market, the additional fee may be worthwhile.
While some investors, like “bitcoin maxis,” have faith in bitcoin’s long-term growth, many traditional institutional investors remain cautious due to its extreme volatility. Calamos’ ETFs cater to those seeking safety from market fluctuations.
A key question raised is how these ETFs compare to MicroStrategy’s (MSTR) convertible bonds, which also offer downside protection. However, as CoinDesk analyst James VanStraten notes, the difference lies in the upside potential—MSTR’s bonds have no cap on potential gains and may convert into equities, offering more risk but also more reward.
The growing trend of downside-protected crypto ETFs reflects increasing innovation in the market, especially with the anticipation of pro-crypto policies under President Donald Trump. This shift has led to rising hopes for more ETF approvals by the Securities and Exchange Commission. Earlier this year, Bitwise, a crypto asset manager, introduced similar strategies by including Treasuries in its crypto ETFs to mitigate price volatility.
