Just In: First Trust Files for Bitcoin Buffer ETF

A new kind of Bitcoin (BTC) Exchange-Traded Product (ETP) is making rounds in the crypto industry. First Trust has submitted a filing for a Bitcoin Buffer ETF that aims to protect users.

Bitcoin Buffer ETF: Scope and Goals

According to the filing lodged with the United States Securities and Exchange Commission (SEC), the Bitcoin Buffer ETF is designed to offer a form of protection for potential Exchange Traded (ETP) trading in the US. 

According to the filing, the ETF will protect up to the “first 30% loss of the Underlying ETP losses at the end of each Target Outcome Period.”

“After the Underlying ETP has decreased in price by more than 30%, the Fund will experience subsequent losses on a one-to-one basis (i.e., if the Underlying ETP loses 35%, the Fund loses 5%). The buffer is before taking into account the Fund’s fees and expenses charged to shareholders.”

Much more, the Bitcoin Buffer ETF will be influenced by brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund’s management fee. It also does not seek to offer any buffer on the first 30% losses of the Underlying ETP at any time other than the end of the Target Outcome Period. 

James Seyffart, the Senior Bloomberg ETF analyst explained that these types of ETPs offer protection on a set percentage of downside loss with capped upside. 

This is quite novel in the crypto industry and Seyffart believes that in the coming weeks, more entities will indicate interest in pursuing such investment options. He also perceives the possibility of having other strategies that offers new exposure to Bitcoin.

Community Awaits Bitcoin ETF Approval

Bitcoin Futures and Ethereum-based ETFs are the current prevalent ETPs out in the market. 

Six months ago, top investment asset management firm BlackRock filed application for a spot BTC ETF with the United States SEC, choosing American cryptocurrency exchange Coinbase as its custodian. BlackRock’s filing spurred many other asset managers including Fidelity Investments, WisdomTree, Valkyrie, VanEck and Invesco to file similar applications.

Similarly, a number of these applicants have also moved to submit Ethereum ETFs as well. The SEC is yet to greenlight most of these applications, especially the spot Bitcoin ETFs. Generally, the broad crypto industry is waiting for the regulator’s decision on the multiple filings for Bitcoin ETF. 

The introduction of the Bitcoin Buffer ETF by First Trust is an indication that many new products that can provide regulated exposure to the top cryptocurrency are likely to show up.