According to CryptoPotato, First Trust, an asset management firm, has filed an application with the United States Securities and Exchange Commission (SEC) to launch the First Trust Bitcoin Buffer ETF. The buffer ETF aims to help investors protect themselves against downside loss while remaining exposed to bitcoin's (BTC) performance. Unlike spot Bitcoin ETFs, which offer direct exposure to BTC's price movement, buffer ETFs use options to provide a targeted level of protection during negative market returns. These funds, also known as defined-outcome ETFs, limit investor losses by offering a buffer in exchange for a cap on potential profits from market gains.
The First Trust Bitcoin Buffer ETF is designed to participate in the positive price returns of the Grayscale Bitcoin Trust or another exchange-traded product (ETP) that seeks to provide exposure to BTC's performance. It also serves as a buffer against the first 30% of the asset's loss over a specified period. However, First Trust noted that there is no guarantee that investors will be completely protected, and they may lose some or all of their money if they invest in the new fund.
The latest application comes as several asset management companies compete to launch the first spot Bitcoin ETF in the United States, with the crypto community awaiting the SEC's decision on the applications by January. Buffer ETFs have been around since 2018 and have attracted over $27 billion in assets, according to a report by multinational financial services company Charles Schwab.
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