How Bitcoin ETFs Are Changing The Way Institutions Manage Risk According To Experts

The Benzinga Future of Digital Assets conference highlighted a critical discussion on digital asset portfolio risk management and return strategies. Industry experts shared insights on how Bitcoin ETFs and the emergence of related financial instruments reshape institutional participation.

ETFs as a Gateway for Institutional Access

During the panel, speakers emphasized the role of Bitcoin ETFs in streamlining institutional access. John Divine of Blockfills explained how ETFs simplify the process, enabling hedge funds and other market participants to engage with digital assets without building extensive crypto-native infrastructure. “ETFs are creating a path for traditional players to enter the market seamlessly,” he said.

Adam Guren of Hunting Hill Global Capital further highlighted how ETFs cater to institutional investors’ operational preferences. The cash-settled structure of U.S. ETFs addresses key compliance and risk concerns, Guren explained, adding that their accessibility could drive more significant flows from institutional players.

Advanced Tools for Risk Management

With the advent of Bitcoin ETF options, new strategies for mitigating risk have emerged. Divine detailed how zero-cost collars, where investors sell call options to finance the purchase of protective put options, are gaining traction. “This strategy allows participants to cap downside risk while maintaining some exposure to potential upside,” he said.

Anthony Rousseau of TradeStation echoed these sentiments, discussing the broader implications of options trading. “Options create deeper liquidity and allow participants to express strategies more flexibly,” Rousseau said. He stressed the importance of understanding leverage, noting its dual-edged potential to amplify gains and losses.

Expanding Market Liquidity

The panel also explored how ETFs are fostering liquidity in digital asset markets. According to Divine, the basis trade—a common strategy where investors buy spot Bitcoin and sell futures contracts—has become increasingly attractive. “With annualized spreads of up to 16%, this approach draws interest from sophisticated players,” he said.

Scott Acheychek of REX Financial pointed out that ETF-linked liquidity mechanisms also transform traditional markets. “Covered call strategies and other structured products are extending the utility of digital assets beyond their native environments,” he explained.

Institutional Engagement and Future Outlook

The speakers unanimously agreed that Bitcoin ETFs accelerate institutional adoption by reducing operational barriers and providing familiar risk management tools. However, they cautioned against over exuberance. “While ETFs are opening doors, the market must remain vigilant about managing leverage and speculative excess,” Rousseau advised.

Looking ahead, Guren expressed optimism about the ongoing convergence of traditional and digital markets. “As these tools mature, we'll see greater alignment between onshore and offshore trading environments,” he said. This evolution, he noted, could lead to a more integrated and efficient global marketplace for digital assets.

Bitcoin ETFs are poised to play a pivotal role in institutional strategies by bridging the gap between traditional finance and cryptocurrency. As new financial instruments emerge, they promise to redefine how investors manage risk and optimize returns in an evolving market.