Markets Daily Crypto Roundup: Detailed Summary
Episode: Crypto Update | A Bitcoin ETF With 100% Downside Protection: Calamos' New Product Explained
Host: Jen Senassi, CoinDesk
Release Date: January 23, 2025
Introduction
In this episode of Markets Daily Crypto Roundup, host Jen Senassi delves into a groundbreaking development in the cryptocurrency investment landscape: Calamos Asset Management's newly launched Bitcoin ETF, CBOJ. This product promises unprecedented 100% downside protection for investors, marking a significant innovation in the crypto financial instruments market.
Calamos' Bitcoin ETF: Features and Protection
Matt Kaufman, Calamos' Head of ETFs, provides an in-depth explanation of the CBOJ ETF. Launched on January 22, 2025, CBOJ is touted as the world's first protected Bitcoin ETF. The standout feature of this ETF is its assurance of 100% downside protection over a one-year outcome period.
Matt Kaufman [01:10]: "We’ve now delivered what I would think is a very remarkable tool for adding protection to your Bitcoin exposure."
CBOJ offers investors the potential upside of Bitcoin with a cap rate of 11.65%, which Matt highlights as being superior to returns available in other equity markets for capital-protected growth.
Matt Kaufman [01:10]: "The cap rate we can announce that is 11.65%, which is higher than you'll get in any other equity market when it comes to capital protected growth."
Market Demand and Innovation in Crypto
The creation of CBOJ was driven by significant demand for Bitcoin investment opportunities that balance growth with risk management. Matt emphasizes the evolving perception of Bitcoin as a digital store of value and its integration into mainstream financial products.
Matt Kaufman [02:28]: "We think that's going to be a really great way for people to access Bitcoin in a measurable way... it really takes that crypto frontier and puts it in a landscape and a framework that people are comfortable with."
The surge in Bitcoin's acceptance is mirrored by substantial investments, with Calamos noting that $100 billion flowed into spot Bitcoin Exchange-Traded Products (ETPs) over the past year.
Comparing CBOJ to Existing Products
Jen Senassi references an article by CoinDesk reporter Helene Braun to clarify how CBOJ differentiates itself from other Bitcoin ETFs. Unlike traditional Bitcoin ETFs that expose investors directly to Bitcoin's market volatility, CBOJ integrates U.S. Treasury bonds to ensure capital protection.
Jen Senassi [04:07]: "If an investor bought a hundred dollars worth of shares in the ETF, Calamos would put a percentage of that in treasury bonds and would grow back to $100 over a one-year period, ensuring that regardless of where the price of Bitcoin stands at the time, the investor has the full $100."
Matt further distinguishes CBOJ from products like MicroStrategy's convertible bonds, emphasizing that CBOJ offers pure Bitcoin exposure without being tied to another company's performance.
Matt Kaufman [06:41]: "With our ETFs, you're getting pure Bitcoin exposure... we're actually getting risk managed exposure to Bitcoin."
Mechanism of the Protected Bitcoin ETF
Matt provides a technical breakdown of how CBOJ achieves its 100% downside protection:
- Allocation: 96% of the portfolio is invested in zero-coupon U.S. Treasury bonds, ensuring the principal is safeguarded and will mature to $100 over one year.
- Options Strategy: The remaining 4% is allocated to a call spread on the Bitcoin index. This involves buying at-the-money call options and selling out-of-the-money calls to generate income, which funds the protection mechanism.
Matt Kaufman [07:35]: "We buy zero coupon treasury bonds at a discount... [and] set up a call spread... so worst case, Bitcoin goes to zero, your call spread expires worthless and you're left with a basket of $100 in U.S. treasuries."
This structure guarantees that no matter Bitcoin's performance, investors will receive their initial investment back, while still participating in upside potential up to the specified cap rate.
Ideal Investors and Use Cases
CBOJ is designed for a diverse range of investors seeking to balance growth with risk management. Matt identifies several ideal investor profiles:
-
Growth-Minded Investors: Younger investors with a longer time horizon who wish to participate in Bitcoin's appreciation while mitigating potential losses.
Matt Kaufman [08:38]: "Maybe you're choosing 80% spot exposure and 20% in CBOJ and now you've just taken off your tail risk."
-
Conservative Portfolio Managers: Investors holding large amounts of cash or in fixed-income products who are looking to diversify into Bitcoin without exposing their capital to significant downside risk.
Matt Kaufman [09:30]: "If you think Bitcoin's going up, that's about the best deal in town for risk-free money."
Calamos envisions CBOJ as a tool that allows investors to strategically manage their exposure to Bitcoin, integrating it seamlessly into various portfolio allocations.
Fee Structure and Competitiveness
One key consideration for investors is the ETF's fee structure. CBOJ comes with a 0.69% annual fee, which is notably higher than some existing Bitcoin ETFs in the market. However, Matt argues that Calamos remains competitive within the outcome-based ETF space.
Matt Kaufman [12:21]: "In the outcome based space, you see price ranges from, you know, 85 basis points, 79, we're at 69. So one of the lower in the marketplaces."
He also points out that compared to leveraged or more complex options-based strategies, CBOJ's fee is relatively modest.
Future Plans for Calamos in Crypto ETFs
Looking ahead, Calamos plans to extend its risk-managed ETF offerings beyond Bitcoin, contingent upon the liquidity and maturity of other cryptocurrency markets. Matt indicates a potential expansion to other liquid crypto assets once they achieve the necessary market depth.
Matt Kaufman [13:13]: "We want to build things with security... I currently don't have plans to do anything on other types of crypto. If they start to achieve the liquidity levels that we're seeing in Bitcoin, then I think that's a possibility."
This strategic approach ensures that Calamos maintains a focus on security and risk management as it explores further innovations in the cryptocurrency ETF space.
Conclusion
Calamos' introduction of the CBOJ Bitcoin ETF represents a significant advancement in providing investors with balanced exposure to the volatile cryptocurrency market. By offering 100% downside protection coupled with potential upside gains, CBOJ caters to both risk-averse and growth-oriented investors. As the cryptocurrency landscape continues to evolve, products like CBOJ may set new standards for risk-managed investment vehicles in the digital asset arena.
Jen Senassi wraps up the episode by congratulating Matt Kaufman and encouraging listeners to subscribe to the CoinDesk Podcast network for more insightful discussions on the ever-changing crypto markets.
Notable Quotes:
- Jen Senassi [05:08]: "I cannot take credit for that. That timing worked out phenomenally..."
- Matt Kaufman [10:43]: "Yeah, that's right. And now you can access Bitcoin from any part of your portfolio."
- Jen Senassi [14:23]: "If you don't already do it, subscribe to the CoinDesk Podcast network..."
This episode provides a comprehensive overview of Calamos' innovative approach to Bitcoin ETFs, highlighting the blend of traditional financial safeguards with cutting-edge cryptocurrency investment strategies. Whether you're an active trader or a cautious investor, CBOJ offers a compelling option for engaging with the dynamic world of Bitcoin.