For those financial advisors still resisting allocations to cryptocurrencies but not wanting to be completely out of sync with growing investor demand, the solution might be found in the Cyber Hornet S&P 500 & Bitcoin 75/25 Strategy ETF (ZZZ).
The strategy combines a 75% allocation to large-cap stocks and a 25% allocation to bitcoin futures to create what is designed to be a happy medium between raging crypto investing and sitting on the sidelines.
“We’re positioning this ETF for holders of the S&P 500 who want a bitcoin kicker,” said Mike Willis, president and lead portfolio manager at Cyber Hornet ETFs in St. Petersburg, Fla.
Launched last December, ZZZ has so far grown to less than $4 million, despite gaining more than 40% this year.
Willis said the fund is currently taking in about $75,000 a day and that it hasn’t yet been part of any official marketing effort.
He believes ZZZ, along with the handful of similar ETFs he plans to file in coming weeks, address a specific need within the financial planning community.
“Right now, a lot of advisors are in the position of being scared to death because bitcoin is going straight up and they look like dinosaurs for avoiding it,” he said. “ZZZ is still 75% exposed to the S&P, so that’s not a lawsuit if bitcoin drops.”
At nearly $100,000, the price of bitcoin has increased more than 130% this year, which is well above the return of ZZZ. However, as Willis is quick to point out, ZZZ’s 40% gain stacks up nicely against the 25% gain by the SPDR S&P 500 ETF Trust (SPY) over the same period.
“In the large-cap blend category, we’re competing against SPY, and our performance is in the top 1% of that category,” he said.
ZZZ was rolled out the month before the Securities and Exchange Commission approved the first spot bitcoin ETFs in January, and Willis said the original intention was to switch the bitcoin exposure in the ETF to bitcoin ETFs.
But he has since decided to stick with the futures contracts as the safer option for investors.
“We use bitcoin futures and we’re proud of that,” he said. “We have the bitcoin futures tracking error because of the price of the futures, but we don’t have any custody risk like the ETFs have.”
ZZZ rebalances monthly, which Willis said means it is always buying low and selling high.
“If we have a month where bitcoin is winning, we’re selling at the end of the month and buying the S&P,” he said. “If bitcoin falls, we’re selling the S&P and buying bitcoin.”
At 95 basis points, ZZZ is not cheap, but Willis believes it’s worth it for advisors looking to straddle the crypto fence.
“I think for the advisors who are just scared they’re going to get caught in something they don’t understand, this is a way to smartly introduce clients to the market,” he said.
As ZZZ gains traction, Willis is planning similar ETFs that separately blend the S&P with Ethereum, Solana, and Ripple. He is also planning to file for an ETF that offers a 50-50 blend of bitcoin and the S&P.
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