Funds that combine bitcoin exposure and derivatives are now widely available to U.S. investors as the scramble to build out the crypto exchange-traded fund ecosystem gets underway. Calamos now has three funds on the market that offer downside protection in exchange for capped upside on bitcoin, in funds built using options. The three products put a “floor” on the losses of 0%, 10% and 20%, and are similar to the defined outcome and so-called buffer funds that have gained popularity on the equity side in recent years. This week, Innovator joined the race with a slightly different product: the Uncapped Bitcoin Floor 20 ETF (QBF) . The fund is also built using options, but instead of a hard cap on the potential upside, the fund gives up a portion of all gains. For the first outcome period, the fund’s “participation rate” is 80%. This means that for every 10% bitcoin rises during the outcome period, QBF should climb 8%. Innovator Chief Investment Officer Graham Day said his team believed the potential for extra upside was worth creating an ETF with more volatility and uncertainty than some of its competitors. “We were looking to bring something that is going to look and feel like bitcoin, but provide a smoother ride,” Day said. The spot bitcoin ETFs launched in January 2024 proved to be a runaway success , with the group attracting tens of billions of dollars of inflows and seemingly helping the cryptocurrency rally throughout the year. Funds holding ether also launched last year. The push for the first crypto ETFs had long been viewed skeptically by the U.S. Securities and Exchange Commission, including former Commissioner Gary Gensler. But fund issuers appear to have taken Donald Trump ‘s victory in November, and SEC Acting Chair Mark Uyeda launching a crypto task force to change the regulation of the industry, as a signal that the next group of funds can get to market quickly. “That era is gone, and all those things that were going to happen slowly are going to happen fast,” said Michael Venuto, chief investment officer and co-founder of ETF white-label platform Tidal Financial. Other types of funds in the work include covered call funds, 2x leveraged funds and products that combine bitcoin and ether exposure. But while many of those funds do use derivatives, they are a familiar structure to regulators. As fund issuers push deeper into the crypto world, new hurdles could emerge. There is already a push for ETFs of so-called memecoins, including Trumpcoin . While industry experts expect large coins that are similar to bitcoin, such as litecoin, to eventually become ETFs, some of the smaller or stranger coins could be viewed skeptically even by Republican administrators. “The next iteration is a lot more murky, because we may now have [SEC Commissioner] Hester Peirce in a good position, Uyeda in a good position, but we still don’t know what the regulations are going to be,” Venuto said. The Trump factor could affect the crypto ETF market in more ways than one. On Thursday, Trump Media announced that its fledgling financial arm Truth.Fi had filed for trademarks for several investment products. Included was Truth.Fi Bitcoin Plus ETF. The trademark announcement did not appear to correspond with an SEC filing as of Friday morning, so details of the product are still unclear, but the potential entrance of a Trump-aligned crypto ETF could be a big factor in an industry where branding is often a difference-maker between similar funds.
