Hedgeye’s New Bitcoin ETF Filing Targets One Of BTC’s Biggest Problems
Hedgeye has filed for a “Hedged Bitcoin” ETF that may mix publicity to identify ETFs with an choices overlay designed to cut back volatility and handle draw back danger. Bloomberg ETF analyst James Seyffart flagged the submitting on X, calling it a brand new try and package deal BTC publicity in a extra defensive wrapper.
“WOAH — NEW: Hedgeye ‘Hedged Bitcoin’ ETF was simply filed,” Seyffart wrote. He added that, in keeping with the submitting, the product would “maintain spot Bitcoin ETFs and use choices methods to cut back vol and draw back danger.”
The proposed fund is called the Hedgeye Hedged Bitcoin ETF and would commerce below the ticker HBIT on NYSE Arca, Inc., in keeping with the prospectus excerpt shared by Seyffart. The doc stays preliminary, stating that the data “just isn’t full and could also be modified,” and that the securities is probably not offered till the registration assertion filed with the Securities and Exchange Commission turns into efficient.
Bitcoin Exposure With A Risk Overlay
The core construction is easy: the fund seeks Bitcoin publicity by ETPs and ETFs, whereas utilizing options to dampen volatility and restrict draw back. The prospectus says the fund goals “to cut back volatility and handle draw back danger by an choices technique that entails the acquisition and/or sale of put and name choices” based mostly on Hedgeye Risk Management, LLC’s proprietary indicators.
Those indicators are described as “Risk Range” indicators, which the submitting says are used to develop market entry and exit factors for investable property. In apply, the ETF wouldn’t merely purchase and maintain Bitcoin-linked merchandise. It would regulate its choices positioning based mostly on market situations, implied volatility, Bitcoin worth traits, liquidity, and different components decided by the adviser.
“The Fund will make the most of choices on shares of Reference ETPs and/or on indexes or ETPs and ETFs that present publicity to Bitcoin worth actions,” the submitting states. “The Fund’s choices technique is designed to cut back volatility and handle draw back danger whereas sustaining publicity to the efficiency of Bitcoin by investments in ETPs and ETFs.”
That language places HBIT in a rising class of crypto merchandise aimed not at maximizing uncooked upside, however at altering the return profile of Bitcoin publicity. For allocators, the related pitch just isn’t merely entry to BTC, which is already available through spot ETFs, however a rules-based overlay supposed to make that publicity extra tolerable throughout drawdowns.
Downside Protection, But With A Trade-Off
The submitting is express that the hedge comes with a value. The fund’s possibility positions are “designed to offer draw back safety,” however may imply “often foregoing some upside potential.” That is the central trade-off within the technique: buyers might get a smoother experience in antagonistic markets, however they might additionally surrender a part of Bitcoin’s upside throughout robust advances.
“The premiums obtained from writing choices are supposed to offer earnings to offset the price of shopping for choices,” the submitting says. The fund might purchase and write each standardized exchange-traded choices and Flexible Exchange Options, or FLEX Options, that are exchange-listed contracts with customizable phrases comparable to strike worth and expiration date.
The prospectus additionally notes that each standardized exchange-traded choices and FLEX Options are assured for settlement by the Options Clearing Corporation. FLEX Options differ from typical listed contracts as a result of buyers can customise sure key phrases which can be usually standardized.
At press time, BTC traded at $62,719.