June 24, 2024
First Trust Files Bitcoin Buffer ETF With SEC
Bitcoin News

First Trust Files Bitcoin Buffer ETF With SEC

First Trust, a financial services firm, has filed for a Bitcoin Buffer ETF with the U.S. Securities and Exchange Commission (SEC), aiming to assist investors in managing risk by focusing on downside protection. Unlike a spot Bitcoin ETF, which tracks Bitcoin’s performance, a buffer ETF uses options to define investment outcomes.

This type of ETF aims to safeguard investors from market losses by imposing a buffer or limit on stock growth over a specified period, commonly known as “defined-outcome ETFs.” Bloomberg ETF analyst James Seyffart noted that buffer ETFs protect against a set percentage of downside loss with capped upside, anticipating more unique strategies in the Bitcoin exposure space.

First Trust’s Bitcoin Buffer ETF represents one of the initial filings of this kind with the SEC. As per ETF.com data, there are currently 139 buffer ETFs trading on U.S. markets with total assets under management (AUM) of $32.54 billion, spanning various asset classes. Buffer ETFs have gained popularity, with BlackRock introducing its iShares buffer ETFs in June 2023. Despite their capabilities, buffer ETFs do not guarantee complete protection, and the filing emphasizes the potential loss of some or all invested funds, with no assurance of success in providing downside protection.

Despite their popularity, buffer ETFs don’t offer complete protection and may not be suitable for all investors, according to experts. BlackRock’s Jay Jacobs pointed out that there is no guarantee of success in the strategy to provide downside protection against underlying ETF losses, and buffer ETFs don’t provide principal or non-principal protection, meaning investors could still lose their entire investment.

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Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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