BlackRock Files Its Third Bitcoin ETF, A 'Buffer' Fund That Targets Investors Seeking Downside Protection

Bitcoin’s (BTC) price edged higher on Tuesday morning, a day after BlackRock (BLK) filed for what Bloomberg Intelligence ETF analyst James Seyffart called a “buffer” Bitcoin fund, designed to soften losses in exchange for capping some gains. The proposed fund adds another layer to crypto investing, pairing limited downside protection with capped upside as the asset manager looks to expand its Bitcoin product offerings.Seyffart said the fund "will offer downside protection but investors will give up some upside to get that protection."BlackRock’s Proposed ETF Trades Upside For ProtectionSeyffart explained that this was BlackRock's third Bitcoin ETF filing, after the spot iShares Bitcoin Trust ETF (IBIT) and the iShares Bitcoin Premium Income ETF (BITA), which sold call options on IBIT to generate income. He added that BlackRock still only offered Bitcoin and Ethereum (ETH) products, with "no other cryptos." was trading around $82,900, up over 1%. On Stocktwits, BTC was among the top trending tickers. Retail sentiment around BTC remained in the ‘extremely bearish’ zone, accompanied by ‘low’ levels over the past day.BlackRock’s Bitcoin ETF Draws $665MThe filing came as IBIT continued to draw money, and it took in over $665 million in net inflows on Monday, according to SoSoValue data. It was the only US spot Bitcoin ETF to record inflows that day. IBIT now holds $66.37 billion in net assets, the largest of the group, out of $105.46 billion across all US spot Bitcoin ETFs.Seyffart noted that the new product was "nowhere near the first of its kind," pointing to similar Bitcoin ETFs from Calamos, First Trust and Innovator. These include the Calamos Bitcoin Structured Alt Protection ETF - January (CBOJ), the FT Vest Bitcoin Strategy Floor15 ETF - January (BFJA) and the Innovator Uncapped Bitcoin 20 Floor ETF (QBF). But "when BlackRock does something (particularly in this space), it tends to make a big splash," Seyffart said.How The Bitcoin ‘Buffer’ ETF Would WorkBlackRock filed for the iShares Bitcoin Managed Protection ETF on Monday, with the proposed ticker "PBIT," according to a filing with the US Securities and Exchange Commission (SEC). The fund sought to give “upside exposure to the iShares Bitcoin Trust ETF (IBIT) and/or similar bitcoin exposure up to an approximate limit, while seeking to provide a level of downside protection.”It would not hold Bitcoin or IBIT shares directly; instead, it would use options on IBIT, mostly FLEX options, along with cash and short-term bonds. The fund would run three overlapping options positions, each started a month apart.Each position would begin with protection set at about 90% of IBIT's value, which would limit the initial loss to about 10% before fees. The filing did not specify the upside cap and left the management fee blank. The filing was set to take effect 75 days after submission, which would be in early January next year.