ETFs Linked to Bitcoin and Treasuries: What They Are and How They Work

Innovation in Exchange-Traded Funds (ETFs) continues to accelerate in 2026, with specialized issuers creating increasingly complex products that combine cryptocurrencies with traditional assets. The recent launch of BTYB by VistaShares exemplifies this trend: an ETF that blends U.S. Treasury bonds with Bitcoin exposure through sophisticated derivatives strategies. This phenomenon reflects how ETFs are evolving from simple index trackers to versatile investment tools.

What Are ETFs and Why Are They Changing

An exchange-traded fund is an investment instrument that aggregates multiple assets into a single structure, trading on exchanges like NYSE or Nasdaq. Unlike traditional mutual funds, ETFs offer daily liquidity and transparency in their holdings. What sets modern ETFs like BTYB apart is their use of options and derivatives strategies to generate additional income, moving away from the passive model of simply holding assets in their portfolios.

VistaShares, a U.S.-based active management specialist, structures BTYB uniquely: approximately 80% of the portfolio is allocated to U.S. Treasury securities and their derivatives, while the remaining 20% is linked to Bitcoin price movements through a synthetic covered options strategy. Instead of buying Bitcoin directly, the fund employs derivatives—specifically call options on BlackRock’s iShares Bitcoin Trust (IBIT)—to establish exposure to the digital asset’s price.

The Options Strategy: Income Versus Growth Potential

The core mechanism of BTYB requires understanding: a covered options strategy sells call options against Bitcoin exposure, generating weekly premium income. This approach limits upside potential compared to direct ownership but offers consistent returns from options premiums. The fund aims to deliver roughly twice the five-year Treasury yield, though these distributions vary weekly based on derivatives market conditions and interest rate movements.

With Bitcoin trading around $65.44K, Ethereum at $1.92K, and other cryptocurrencies like Solana at $77.05, ETFs combining these assets with traditional instruments offer new macroeconomic exposure opportunities.

Global Expansion of Cryptocurrency ETF Markets

Regulation has accelerated this innovation. In December 2024, the U.S. Securities and Exchange Commission (SEC) approved two spot cryptocurrency index ETFs: Hashdex’s Nasdaq Crypto Index US and Franklin Templeton’s Franklin Crypto Index. Both hold spot Bitcoin and Ethereum and track their respective cryptocurrency benchmark indices on exchanges like Nasdaq and Cboe BZX.

Experimentation continues. Bitwise Asset Management launched an actively managed ETF including Bitcoin, precious metals, and mining stocks to hedge against fiat currency devaluation. Hashdex expanded its Crypto Index US ETF to include XRP at $1.35, Solana, and Stellar (XLM) at $0.15, maintaining a balanced five-cryptocurrency portfolio.

The Future of ETFs: From Specialization to Integration

In 2025, the market accelerated its evolution. 21Shares introduced two cryptocurrency index ETFs: the 21Shares FTSE Crypto 10 Index ETF and the 21Shares FTSE Crypto 10 ex-BTC Index ETF, both tracking FTSE Russell cryptocurrency indices with baskets of large-cap digital assets.

This proliferation of innovative ETFs indicates a clear trend: fund issuers are moving beyond single-asset products to create hybrid strategies that blend cryptocurrencies, bonds, options, and other derivatives. ETFs are no longer just passive tracking tools but sophisticated vehicles designed for different risk profiles and income objectives. For investors, understanding what modern ETFs are is increasingly critical, especially as these funds combine traditional exposures with the characteristic volatility of the crypto market.