New Bitcoin ETF Provides Total Downside Protection Against Market Volatility. Learn How It Works.

Calamos Launches Bitcoin ETFs with Full Downside Protection, Additional Funds Coming in February

Calamos, a leading global investment management firm, has launched a new Bitcoin (BTC) exchange-traded fund (ETF) aimed at protecting investors from Bitcoin’s price volatility. The CBOJ ETF, which debuted on Wednesday, provides 100% downside protection while offering upside potential of 10% to 11.5% over a one-year period.

By 12:11 p.m. ET, the ETF had traded approximately 635,714 shares, marking a positive initial reception. CBOJ is the first of three funds being launched by Calamos, with CBXJ and CBTJ scheduled to launch on February 4. These two funds will offer 90% and 80% downside protection, respectively, with capped upside potential of 28% to 30% for CBXJ and 50% to 55% for CBTJ.

The downside protection for these ETFs is provided through a mix of U.S. Treasuries and options linked to Bitcoin index derivatives. Each ETF has an annual upside cap, which is reset each year. For instance, if an investor purchases $100 worth of shares, a portion of the investment will be placed in Treasury bonds, ensuring that the value will grow back to $100 over the course of a year, regardless of Bitcoin’s market fluctuations.

The remaining funds are allocated to purchasing Bitcoin options, allowing investors to gain exposure to Bitcoin without owning the cryptocurrency directly. However, this added protection comes at a 0.69% management fee, which is above the average 0.51% fee for U.S.-based Bitcoin ETFs. Although more expensive, many investors might find the added security worth the cost, especially those seeking safer exposure to the volatile digital asset market.

While Bitcoin maximalists and long-term Bitcoin believers focus on the cryptocurrency’s growth, traditional institutional investors remain concerned about Bitcoin’s volatility. These new ETFs are designed to appeal to those more cautious investors by offering downside protection while still providing exposure to Bitcoin.

There has been speculation about whether these Calamos ETFs will compete with MicroStrategy’s (MSTR) convertible bonds, which also offer some downside protection. However, CoinDesk analyst James VanStraten notes that the two products differ. MicroStrategy’s bonds do not have an upside cap, which means investors may experience higher risks but also greater potential rewards.

As downside protection ETFs gain popularity, especially with the potential for a more crypto-friendly regulatory environment under President Donald Trump’s administration, expectations are high that many of these ETF applications will be approved by the Securities and Exchange Commission (SEC).

In line with this trend, Bitwise, a prominent crypto asset manager, revamped its three futures-based crypto ETFs in October 2024 to include exposure to U.S. Treasuries. This strategy protects against market downturns by rotating between crypto assets and Treasuries depending on market conditions, giving investors more ways to manage risk in the evolving digital asset landscape.

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