After spot Bitcoin ETFs saw outflows of over $1 billion last week, asset management firm Calamos said some investors are turning to Bitcoin ETFs with built-in downside protection. The company stated that these products have recorded net inflows of approximately $10 million to $15 million in the past few weeks.
Consultant demand shifts towards controlling volatility
Matt Kaufman, head of ETF business at Calamos, said that discussions among wealth advisors about crypto asset allocation have shifted. Early on, the focus was more on whether to include Bitcoin in a portfolio; now, the emphasis is on how to maintain upside exposure while mitigating volatility and drawdowns.
Calamos currently offers three types of related products, including versions with full downside protection, and versions that allow for 10% or 20% downside risk. The company positions these products as alternatives to traditional equity, bond, and cash allocations.
The product is constructed using US Treasury bonds and options.
The core structure of these ETFs is to allocate the majority of their assets to US Treasury bonds and then profit from price increases through options linked to Bitcoin-related indices. Kaufman stated that the product invests approximately 90% of its assets in Treasury bonds to establish downside protection.
- Net inflows of approximately $10 million to $15 million in recent weeks.
- Approximately 90% of assets are allocated to US Treasury bonds.
- The products are divided into three categories: full protection, 10% risk, and 20% risk.
To this end, Calamos created its own Bitcoin-related index and, after the launch of spot Bitcoin ETF options, listed FLEX options linked to that index. The product is available in both quarterly versions and tiered versions suitable for portfolio diversification.
ETF competition is shifting towards strategy stratification.
Kaufman believes the crypto ETF market is shifting from single spot exposure to more segmented strategy products. He summarizes the current industry trend into three categories: protective, income-generating, and growth-oriented.
He stated that some investors are shifting from cash-like products to fully protected Bitcoin ETFs, hoping to participate in Bitcoin's performance without directly experiencing price drops. Meanwhile, other issuers are increasingly betting on leveraging Bitcoin volatility to generate returns through options strategies.
Calamos anticipates that Bitcoin's high volatility will remain a key characteristic of the asset, which will continue to support demand for structured products and options strategies.
