Calamos bets protected Bitcoin ETFs can outlast crypto market swings

As more than $1 billion exited spot Bitcoin ETFs last week, Calamos says investors are rotating into Bitcoin products with built-in downside protection.

Latest developments: Calamos says its protected Bitcoin ETFs are attracting inflows even as spot Bitcoin ETFs see redemptions.

• Matt Kaufman, head of ETFs at Calamos, said the firm saw roughly $10 million to $15 million in inflows over the past several weeks.
• Kaufman said advisors are increasingly looking for Bitcoin exposure that reduces volatility and downside risk.
• The firm offers three versions of its protected Bitcoin ETFs, including products with full downside protection and others with 10% or 20% downside risk.
• “You can get upside of Bitcoin with no downside risk,” Kaufman said.
• Kaufman joined CoinDesk's Jennifer Sanasie on Public Keys.

How it works: Calamos structures the products using Treasuries and options tied to Bitcoin-linked indexes.

• Kaufman said the firm allocates roughly 90% of assets into Treasuries to build downside protection.
• The remaining budget is used to buy Bitcoin-linked call spreads through FLEX options.
• Calamos created its own Bitcoin-linked index and listed FLEX options tied to that index after the launch of spot Bitcoin ETF options.
• The products are offered in quarterly structures as well as laddered versions designed for model portfolios.

What advisors are asking: Wealth managers are becoming more sophisticated in how they evaluate crypto exposure.

• Kaufman said advisors previously focused on whether Bitcoin belonged in portfolios at all.
• Now, advisors are asking how to improve risk-adjusted returns and portfolio construction using crypto exposure.
• Calamos positions its products as alternatives to traditional portfolio allocations, including broad equities, bonds and cash.
• Kaufman said some investors are moving from cash-like products into fully protected Bitcoin ETFs tied to Bitcoin performance but without downside exposure.

Reading between the lines: The crypto ETF market is evolving beyond simple spot exposure.

• Kaufman said the industry is increasingly dividing crypto ETF strategies into three categories: protection, income and growth.
• Calamos previously launched auto-callable income ETFs and is exploring additional crypto-related strategies.
• Other ETF issuers have focused on generating yield from Bitcoin volatility through options-based products.
• “You don’t just have to sit in the spot vehicle anymore and ride out those waves,” Kaufman said.

What comes next: Calamos expects Bitcoin volatility to remain a defining feature of the asset.

• Kaufman said he expects Bitcoin to revisit previous highs despite recent market turbulence.
• He argued Bitcoin’s volatility profile creates opportunities for structured products and options-based strategies.
• “I think we’re going higher,” Kaufman said.

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