CBOJ Bitcoin ETF Promises a Revolutionary Approach to Addressing Bitcoin’s Notorious Volatility

The CBOJ ETF blends U.S. Treasury bonds with options tied to the CBOE Bitcoin US ETF Index. This unique structure allows investors to gain exposure to Bitcoin while mitigating the high risks typically associated with the cryptocurrency.

Calamos Investments, a renowned asset management firm, is set to launch a groundbreaking exchange-traded fund (ETF) that offers an unprecedented level of downside protection for investors seeking exposure to Bitcoin. This first-of-its-kind ETF will begin trading on January 22, 2025, on the Chicago Board Options Exchange (CBOE) under the ticker symbol CBOJ.

This ETF will blend U.S. Treasury bonds with options linked to the CBOE Bitcoin US ETF Index. Through this innovative structure, investors will gain exposure to Bitcoin while mitigating the high risks associated with the cryptocurrency. Unlike traditional ETFs, CBOJ will reset its downside protection annually, ensuring investors a fresh cap on potential gains each year while being shielded from losses.

According to Matt Kaufman, Head of ETFs at Calamos, many investors have been hesitant to invest in Bitcoin due to its epic volatility. Calamos seeks to meet advisor, institutional, and investor demands for solutions that capture Bitcoin’s growth potential while mitigating the historically high volatility and drawdowns.

Kaufman's statement highlights the broader trend in the financial industry, where institutions aim to bridge the gap between traditional investing and cryptocurrency. Defined outcome products, such as buffer funds, have gained traction recently, especially after the 2022 market downturn, which saw simultaneous declines in stocks and bonds.

CBOJ's introduction is setting a precedent for crypto investments by integrating strategies similar to equity ETFs. Reports suggest that structured Bitcoin ETFs are gaining momentum. Spot Bitcoin funds, which launched in January 2024, saw an extraordinary debut, attracting billions of dollars in inflows.

That surge helped push Bitcoin's value to a record high of over $100,000. The iShares Bitcoin Trust ETF (IBIT), being the most prominent among those funds, now boasts over $50 billion in total assets.

Despite this success, financial advisors have largely remained cautious. Kaufman noted that Bitcoin's history of price swings continues to deter many professionals. For folks looking to access that space, they want to do so in a risk-managed framework or something that makes a little more sense for their portfolio, he explained.

CBOJ is designed to cater to this demand, offering an avenue for risk-averse investors to participate in the crypto market. This ETF will hold a portfolio of long-duration U.S. Treasury bonds and short- to medium-term options on the CBOE Bitcoin US ETF Index, aiming to provide downside protection while tracking the performance of the index.

Unlike traditional Bitcoin ETFs, CBOJ's annual reset ensures that investors remain protected year after year. Each year’s upside cap will be determined based on options pricing, with the first set to be finalized on January 22, 2025. The holding period for the fund will span from January 22, 2025, to January 31, 2026.

This protective structure appeals to risk-averse investors who wish to explore the crypto space without exposing their portfolios to Bitcoin’s unpredictable price swings. By combining Bitcoin options with the stability of U.S. Treasury holdings, CBOJ offers a balanced approach to crypto investment.

Kaufman and his team envision CBOJ being held alongside pure-play Bitcoin ETFs, aiming to create a diversified investment strategy. Calamos is targeting a specific group of investors—those who want exposure to Bitcoin’s growth but also value downside protection.

Calamos is among several ETF issuers seeking to diversify their crypto offerings with innovative strategies. Innovator and First Trust are also pursuing this approach, while Grayscale and Roundhill have proposed income-generating Bitcoin funds, such as covered call ETFs.

As cryptocurrency regulations evolve, more funds are expected to hit the market throughout 2025. President-elect Donald Trump’s incoming administration is anticipated to take a friendlier stance toward crypto, which could pave the way for more crypto-focused ETFs.

The Securities and Exchange Commission (SEC), under new leadership, could play a significant role in accelerating filings and approvals. This development is likely to benefit ETF issuers and investors seeking greater access to crypto markets.