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Bitcoin’s price has dropped by more than 70% in a single quarter, but new ETFs are helping investors reduce the risk of those wild swings. Here’s how.
For everyone, this volatility makes it hard to justify adding cryptocurrenices to their portfolios. Just look at Bitcoin's price over this decade👇
Bitcoin fell over 75% from it's 2022 high ($67.5k) to just $16.5k. It's not suprising investors steer clear of it.
How Crypto ETFs Reduce Risk
New crypto ETFs coming out are attempting to make crypto investing less risky. Here’s how:
- Buffer ETFs
These ETFs protect against losses up to a certain percentage (e.g,. 10% or 30%) but cap your potential gains. If Bitcoin drops, you’re covered. If it rises, your gains are limited. - Covered Call ETFs
These ETFs provide steady income by trading away some of Bitcoin’s potential upside. This means less risk, but also fewer chances for big profits if Bitcoin’s price spikes.
These strategies help smooth out Bitcoin’s wild swings, making it a more comfortable investment for those worried about major losses.
Why Crypto ETFs Are Gaining Popularity
The demand for risk-managed ETFs is skyrocketing. In traditional markets, assets in buffer ETFs grew from near zero in 2019 to $47 billion in 2024, according to Financial Times.
The demand is clear—investors are looking for safer ways to invest, and crypto ETFs are catching on to this trend.
There's One Downside to these ETFs
Though promising, regulatory approval is still pending, and the size of these funds is limited by options trading rules. If you’re not comfortable with Bitcoin’s risks, these ETFs may not be the solution.
Key Takeaways
- Bitcoin’s price can drop over 70% in a quarter, making it highly volatile.
- Buffer ETFs can protect up to 30% of losses while capping gains.
- Buffered ETFs grew from $0 in 2018 to $47 billion in 2024, showing huge demand.