Global X unveils risk-managed bitcoin futures ETF

Mar 25th, 2024 | By | Category: Alternatives / Multi-Asset

Global X has introduced a new crypto ETF in the US that offers exposure to bitcoin futures using a systematic risk-managed approach.

Global X unveils risk-managed bitcoin futures ETF

BTRN aims to address the inherent volatility of bitcoin prices.

The Global X Bitcoin Trend Strategy ETF (BTRN US) has been listed on NYSE Arca with an expense ratio of 0.95%.

The fund tracks the CoinDesk Bitcoin Trend Indicator Futures Index which leverages the insights of CoinDesk Indices to determine when to allocate to bitcoin futures or when to de-risk by shifting into short-term US Treasuries.

The allocation strategy hinges on the CoinDesk Bitcoin Trend Indicator (BTI), a daily signal reflecting bitcoin’s price momentum strength and direction. Comprising four inputs, the BTI compares bitcoin’s short-term and longer-term moving averages to derive its signal.

Based on the BTI, BTRN adjusts its allocation between bitcoin futures and short-term Treasuries every week. When the BTI indicates a significant uptrend, the ETF allocates 100% to bitcoin futures. In a moderate uptrend scenario, the allocation shifts to 75% bitcoin futures. In times of no discernible trend, the ETF splits its allocation evenly between bitcoin and US Treasuries. Conversely, during a moderate downtrend, the allocation reduces to 25% bitcoin. Lastly, in the event of a significant downtrend, the ETF allocates entirely to US Treasuries.

BTRN aims to address the inherent volatility of bitcoin prices, offering potential enhancements to risk-adjusted performance compared to direct investments in bitcoin or bitcoin futures. One of the primary advantages of the strategy lies in its capacity to alleviate the impact of drawdowns, which can be particularly severe in the crypto realm.

According to CoinDesk, historical backtesting spanning five years reveals that a hypothetical portfolio combining bitcoin and cash guided by the BTI would have notably decreased exposure to bitcoin during periods colloquially termed ‘crypto winters.’ However, it would still participate in price uptrends, albeit in a risk-adjusted manner.

Adam Sze, Head of Product Development at Global X, commented: “BTRN was designed to help navigate various market cycles by providing dynamic exposure to bitcoin futures based on bitcoin’s current price trend. The simple, yet powerful idea behind trend strategies is that markets respond slowly to news and changes. BTRN seeks to capitalize on the shifts in market sentiment as part of a systematic and dynamic approach which may capture upside potential and minimize drawdowns relative to a bitcoin futures-only allocation.”

While the fund’s expense ratio matches that of the largest bitcoin futures ETF, the $1.8 billion ProShares Bitcoin Strategy ETF (BITO US), its price tag is significantly higher than the lowest-cost spot bitcoin ETFs which debuted at the beginning of this year and are priced around 0.19%-0.20%.

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