First Trust Takes Action to Launch a Bitcoin ETF in the U.S.: What Sets This ETF Apart?

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• First Trust has submitted a filing for a Bitcoin Buffer ETF aiming to protect users.
• According to the filing, the ETF will provide protection of up to the first 30% of underlying ETP losses at the end of each Target Outcome Period.
• Currently, the prevalent ETPs in the market include Bitcoin Futures and Ethereum-based ETFs.

A notable ETF application in the U.S. has been filed by First Trust, and this ETF application stands out from traditional Bitcoin ETFs!

First Trust Files for a Bitcoin ETF in the U.S.

A new type of Exchange-Traded Product (ETP) for Bitcoin (BTC) is making headlines in the crypto industry. First Trust has submitted a filing for a Bitcoin Buffer ETF, aiming to provide a form of protection for potential Exchange-Traded Product (ETP) trading in the U.S., according to the filing made with the U.S. Securities and Exchange Commission (SEC).

According to the filing, the ETF will provide protection of up to the first 30% of underlying ETP losses at the end of each Target Outcome Period. The ETF is further explained as follows: “After the price of the underlying ETP falls 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 will lose 5%). The buffer is pre-expense and does not take into account brokerage commissions, transaction fees, taxes, and extraordinary expenses incurred by the Fund.”

Importantly, the Bitcoin Buffer ETF will be impacted by brokerage commissions, transaction fees, taxes, and extraordinary expenses that are not included in the Fund’s management fee. Additionally, the Fund does not attempt to provide any buffer to the first 30% loss of the underlying ETP at any time outside the end of the Target Outcome Period.

James Seyffart, Bloomberg’s Senior ETF Analyst, explained that such ETPs provide protection at a specific percentage of a certain downside loss and have a capped upside. This is a relatively new concept in the crypto industry, and Seyffart believes that more institutions may express their intention to follow such investment options in the coming weeks. He also suggests that there could be other strategies providing exposure to Bitcoin in the future.

Community Awaits Bitcoin ETF Approval

Currently, prevalent ETPs in the market include Bitcoin Futures and Ethereum-based ETFs. Six months ago, the top-tier asset management firm BlackRock applied for a spot BTC ETF with the United States SEC and selected the American crypto exchange Coinbase as the custodian. BlackRock’s application led to many other asset managers, such as Fidelity Investments, WisdomTree, Valkyrie, VanEck, and Invesco, making similar applications.

Similarly, a few of these have also moved to offer Ethereum ETFs. The SEC has yet to approve most of the spot Bitcoin ETF applications. Overall, the broader crypto industry is awaiting regulatory decisions on multiple applications for Bitcoin ETFs. The introduction of the Bitcoin Buffer ETF by First Trust indicates that many new products that can provide regulated exposure to the top cryptocurrency are likely to emerge.