Key Takeaways
Video: Protect the Downside, Keep the Bitcoin Upside.mp4
We believe Bitcoin’s return potential is well understood. So is its volatility. What gets discussed less often is the gap between the two — the fact that an investor can be right about Bitcoin’s direction over time and still end up with a bad outcome if they get shaken out at the wrong moment by a drawdown they weren’t positioned to survive.
The question Mark Adams, CIO and Co-Founder of Fortuna Funds, kept returning to was whether that gap could be closed. Could you construct something that potentially keeps most of Bitcoin’s upside while limiting the downside moves that force investors out of otherwise good positions? And could you do it in a structure that’s actually liquid and accessible?
His answer is the Fortuna Hedged Bitcoin ETF(ticker: HBTC). But the context behind why that answer is possible now — and wasn’t possible just a few years ago — matters as much as the strategy itself.
Most asset classes have natural floors that slow or limit drawdowns. Equities have valuations, dividends, buybacks. Bonds have coupons and par value. These don’t prevent losses, but they give investors something to hold onto when prices fall.
Bitcoin has none of those anchors. Its drawdowns are driven almost entirely by sentiment, positioning, and liquidity — which means they can be sudden, severe, and disorienting in a way that equity drawdowns rarely are. A 20% decline in the S&P 500 over several months gives investors time to think. A 30% Bitcoin drawdown over a weekend does not.
“Bitcoin does have a lot of volatility. If you can avoid those downside moves — button up your downside from having that negative 20, 30, 40, 50% kind of move that we’ve seen and we just saw last quarter — and yet still participate in most of the upside.”
— Mark Adams, CIO & Co-Founder, Fortuna Funds
The idea that hedges should be placed at the onset of a new trade is critical to avoiding reactionary trading. For most investors, the decision to sell during a drawdown is not a rational one. It’s a reaction to pain. A structure that limits the pain changes the decision.
October 10th has become a reference point in crypto markets for how quickly an unhedged or leveraged Bitcoin position can go wrong.
On that day, Bitcoin flash-crashed in a matter of minutes. Investors who held leveraged positions or had trailing stop losses in place were liquidated before they could react — some by their prime brokers or Futures Commission Merchants, automatically, with no opportunity to make a considered decision. The loss wasn’t the result of a wrong long-term view. It was the result of a position structure that couldn’t survive a short-term shock.
“October 10th is a day that will live in infamy for a lot of crypto holders. If you had trailing stop losses or a levered position, you could have been liquidated by your FCM or your prime broker. Unfortunately.”
— Mark Adams, CIO & Co-Founder, Fortuna Funds
This is the weekend risk problem. Bitcoin trades around the clock, seven days a week. Equity markets close on Friday and reopen Monday. If Bitcoin moves sharply on a Saturday night, investors in unprotected positions have no mechanism to respond until after the damage is done. A hedged structure with built-in downside protection doesn’t require an investor to be watching at 2am.
HBTC’s options-based hedge is in place before the weekend begins, before the flash crash happens, before the drawdown arrives. That’s the point.
This is a part of the story that doesn’t get enough attention. A hedged Bitcoin strategy isn’t just a good idea — it’s an idea that required the right market infrastructure to exist before it could be executed properly.
“This wouldn’t have been able to happen a year and a half ago. If you said to me, ‘Mark, let’s make a liquid hedged Bitcoin strategy,’ it’s like, well, that really didn’t work. The options were not there.”
— Mark Adams, CIO & Co-Founder, Fortuna Funds
Bitcoin’s evolution as an investable asset has moved through distinct phases. Early adoption meant buying Bitcoin on hardware wallets from individuals you had to trust. Then came centralized exchanges. Then Bitcoin ETFs, which brought the asset into standard brokerage accounts and regulatory frameworks. Then, finally, a liquid options market developed around those ETFs — one deep enough and functional enough to support an actively managed hedging strategy.
That last step is what made HBTC possible. Without a mature options market on Bitcoin-related ETFs, there is no cost-effective way to construct the collar structure that defines HBTC’s approach. The fund exists because the infrastructure finally caught up to the idea.
HBTC uses an actively managed options strategy applied to bitcoin-related securities to provide Bitcoin-linked exposure while seeking to reduce downside volatility. The structure combines three elements:
This combination — sometimes described as a collar structure — allows the fund to participate meaningfully in Bitcoin’s upside while limiting how much investors can lose when Bitcoin sells off hard. The options positions are repositioned monthly, keeping the hedge calibrated to current market conditions rather than becoming stale as Bitcoin’s price moves.
The goal is not to eliminate Bitcoin’s volatility entirely. It is designed to remove the tail risk — the 30%, 40%, 50% drawdowns — that make Bitcoin genuinely difficult to hold for most investors and their clients.
HBTC is not the right choice for every Bitcoin allocation. An investor who wants maximum directional exposure to Bitcoin and can genuinely hold through a 50% drawdown without flinching has simpler and less expensive options.
HBTC is designed for a different investor profile: one who wants real participation in Bitcoin’s return potential but needs a structure that makes it possible to stay invested when things get difficult. That includes:
For these investors, the hedge embedded in HBTC isn’t a performance drag. It’s what makes the allocation viable in the first place.
HBTC is managed by Mark Adams, CIO and Co-Founder of Fortuna Funds, with more than 20 years of professional options trading experience including time at the Federal Reserve. The strategy reflects an institutional derivatives approach — the kind of risk management framework professional options traders use to stay in difficult markets — now accessible through a single ETF in a standard brokerage account.
The fund launched March 19, 2025, and is listed on the Cboe BZX Exchange. Foreside Fund Services, LLC is the fund’s distributor.
The Fortuna Hedged Bitcoin ETF seeks to achieve long-term capital appreciation. The Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective primarily through its investments in Bitcoin-related securities. The Fund does not invest directly in Bitcoin.