Bitcoin Bond ETFs: How Likely Is SEC Approval in 2025?
Bitcoin Bond ETFs invest in bonds from companies that use the funds to buy Bitcoin. This lets investors earn interest from the bonds while gaining indirect exposure to Bitcoin.
So, why is everyone talking about them now?
Strive Asset Management, co-founded by Vivek Ramaswamy, has applied for SEC approval to launch a Bitcoin Bond ETF. If approved, it would be a big step toward bringing Bitcoin-backed investments into mainstream finance.
For investors, these ETFs offer a way to benefit from Bitcoin’s growth without holding the cryptocurrency directly. They blend traditional fixed-income investments with Bitcoin’s upside potential, making them an interesting option for portfolio diversification. But they also carry risks, including Bitcoin’s volatility and regulatory uncertainty.
In this article, we’ll break down everything you need to know—how Bitcoin Bond ETFs work, their pros and cons, and how they compare to traditional bonds, spot Bitcoin ETFs, and direct crypto investments.
What is a Bitcoin Bond ETF?
Bitcoin Bond ETFs mix traditional bonds with Bitcoin exposure. Here’s how they work in simple terms.
Bonds are like loans. You lend money to a company or government, and they pay you interest until they return your money when the bond matures. For example, if you buy a U.S. Treasury bond for $1,000 with a 5% interest rate, you’ll get $50 per year until maturity.
ETFs (Exchange-Traded Funds) are baskets of investments that trade like stocks. They hold different assets—stocks, bonds, or commodities—giving you diversification.
For example, the SPDR S&P 500 ETF (SPY) includes stocks from major U.S. companies like Apple, Microsoft, and Amazon, letting you invest in the overall market instead of picking individual stocks.
The SEC approved the first spot Bitcoin ETFs in January 2024, along with 10 others. Soon after, the SEC also approved Ethereum spot ETFs, expanding crypto investment options in traditional markets.
Bitcoin Bond ETFs go a step further. These funds invest in bonds issued by companies that use the proceeds to buy Bitcoin.
A well-known example is MicroStrategy, which has raised billions through bonds to build its massive Bitcoin holdings. As of January 27, 2025, MicroStrategy owns 471,107 BTC, worth around $27.95 billion USD.
Other Bitcoin-backed bonds come from companies involved in mining, trading, or blockchain development. El Salvador pioneered this concept with its “Volcano Bonds,” using bond sales to fund Bitcoin mining powered by volcanic energy and build Bitcoin City.
How Do Bitcoin Bond ETFs Work?
Bitcoin Bond ETFs work by investing in corporate bonds from companies that use debt to buy Bitcoin.
What does that mean?
Fund managers pool investor money to purchase these bonds, generating returns through interest payments while giving investors indirect exposure to Bitcoin.
As mentioned, MicroStrategy has raised billions by issuing convertible bonds to buy Bitcoin. These bonds give investors the option to convert their holdings into company stock under certain conditions, adding potential upside. Future Bitcoin Bond ETFs, like the proposed Strive Bitcoin Bond ETF, will likely use a mix of these bonds along with derivatives like swaps and options to gain exposure.
Strive Asset Management has applied for SEC approval to launch a Bitcoin Bond ETF. According to their statement, they are planning to invest at least 80% of their notional exposure in Bitcoin-related bonds. These bonds mainly come from MicroStrategy and other companies raising capital to buy Bitcoin. The fund is still waiting for regulatory approval.
Several factors influence a Bitcoin Bond ETF’s share price:
- Bitcoin’s price: Since issuers like MicroStrategy hold large Bitcoin reserves, bond values rise and fall with BTC’s price.
- Bond market conditions: Interest rates and investor sentiment affect bond prices and ETF performance.
- Issuer’s creditworthiness: Companies with stronger financials maintain higher bond valuations, while weaker issuers may see declines.
Bitcoin Bond ETFs vs. Traditional Bonds
Traditional bonds offer stability and steady income, while Bitcoin Bond ETFs have higher potential rewards but come with greater risks and price swings. Let’s dive deeper:
Traditional bonds, issued by governments or corporations, are lower-risk investments. They provide stable interest payments and are less volatile, making them a safer choice for conservative investors. Their value is mainly influenced by interest rates and economic conditions. They are also highly liquid, meaning they can be easier to buy and sell.
Bitcoin Bond ETFs, on the other hand, are linked to the crypto market. Their value depends more on Bitcoin’s price than interest rates. Since they invest in bonds from Bitcoin-focused companies, they tend to be more volatile and carry higher risks. As for liquidity, we don’t have any data for it.
Spot Bitcoin ETFs vs. Bitcoin Bond ETFs
Spot Bitcoin ETFs track Bitcoin’s price directly, while Bitcoin Bond ETFs hold bonds from Bitcoin-focused companies. Also, Spot ETFs depend only on Bitcoin’s price, while Bitcoin Bond ETFs provide interest income with potential Bitcoin-related gains. Let’s dive deeper:
A spot Bitcoin ETF holds Bitcoin directly, allowing investors to gain exposure to BTC’s price without needing to own or store the cryptocurrency. The ETF’s value moves up and down with Bitcoin’s market price, making it a simple way to invest in Bitcoin through a regular brokerage account.
Click here to read our list of best spot Bitcoin ETFs in the US right now.
A Bitcoin Bond ETF, on the other hand, doesn’t hold Bitcoin itself. Instead, it invests in bonds issued by companies that use the proceeds to buy Bitcoin—like MicroStrategy. These ETFs generate returns from bond interest payments but are also affected by Bitcoin’s price, bond market conditions, and the financial health of the issuing companies.
Bitcoin-Backed Bonds vs. Bitcoin Bond ETFs
Bitcoin-backed bonds are individual investments, while Bitcoin Bond ETFs spread risk across multiple bonds, offering more liquidity and flexibility. Let’s dive deeper:
A Bitcoin-backed bond is a type of bond that either uses Bitcoin as collateral or is backed by Bitcoin-related revenues. Governments and companies issue these bonds to raise money, and investors earn interest in return. A well-known example is El Salvador’s “Volcano Bonds”, which help fund Bitcoin mining and infrastructure projects.
A Bitcoin Bond ETF works differently. Instead of holding just one Bitcoin-backed bond, it bundles multiple bonds from crypto-related companies into a single fund. Investors can buy and sell ETF shares on stock exchanges, making it easier to access and providing built-in diversification.
Risks and Benefits of Bitcoin Bond ETFs
Benefits
- Indirect Bitcoin Exposure – Investors can gain exposure to Bitcoin without directly holding BTC.
- Diversification – These ETFs mix traditional bonds with Bitcoin-focused investments, helping balance risk and potential returns.
- Regulated Investment – Offers more oversight compared to directly holding crypto.
- Passive Income – Investors earn interest from the bonds, creating a steady income stream.
Risks
- Issuer Credit Risk – If companies like MicroStrategy face financial trouble, their bonds could lose value.
- Bitcoin Volatility – Since these ETFs invest in Bitcoin-heavy companies, BTC price swings can impact their performance.
- Regulatory Uncertainty – The SEC hasn’t approved any Bitcoin bond ETFs yet, and future regulations could limit their availability.
- Liquidity Concerns – Even if approved, these ETFs may have lower trading volume than traditional bond ETFs, making buying or selling shares less efficient.
FAQs
What are the tax implications of investing in crypto bond ETFs
Investing in crypto bond ETFs comes with tax obligations, mainly on interest income and capital gains.
Interest Income: The interest earned from bonds in a Bitcoin Bond ETF is usually taxed as ordinary income. In the U.S., this means it’s taxed at your regular income tax rate. In some European countries, it may also face withholding taxes or special investment taxes.
Capital Gains: Selling ETF shares for a profit triggers capital gains tax. In the U.S., short-term gains (held for less than a year) are taxed as ordinary income, while long-term gains (held for over a year) get lower tax rates. Other countries have different rules, with some offering exemptions for long-term holdings, like Germany.
To reduce taxes, investors can use tax-advantaged accounts like IRAs in the U.S. or ISAs in the UK, where interest and capital gains may be tax-deferred or tax-free. Another option is tax-loss harvesting, which allows investors to offset taxable gains by selling underperforming assets.
Since tax laws vary by region, it’s best to consult a tax professional to ensure compliance and optimize tax efficiency.
If you hold actual crypto assets, tools like Bitcoin.Tax can help investors track their assets and estimate tax liabilities, making it easier to stay compliant.
Are crypto bond ETFs a good investment?
Bitcoin Bond ETFs haven’t been approved yet, including the one Strive Asset Management proposed. But if they get the green light, they could appeal to investors willing to take on more risk.
These ETFs invest in bonds from Bitcoin-focused companies, so their value is influenced by both Bitcoin’s price and bond market conditions. That makes them more volatile than traditional bond ETFs.
Financial advisors suggest keeping crypto bond ETFs, or any crypto-related asset as a small part of a portfolio. A moderate-risk investor might allocate 5-10% to crypto-related assets, while aggressive investors could go a bit higher. Conservative investors may prefer traditional bond ETFs for stability.
If you’re still not sure it’s wise to consult a financial advisor before diving in.
How to invest in crypto bond ETFs?
Bitcoin Bond ETFs aren’t available yet, but if they get approved, buying them would work like any other bond ETF.
You’d need a brokerage account that supports ETF trading. From there, you could search for the ETF’s ticker symbol and place a buy order—either at market price or with a limit order. Some brokerages also offer automatic recurring investments, making it easier to build exposure gradually.
Before investing, it’s important to review key factors like expense ratio, liquidity, and issuer credit quality. Because these ETFs come with higher risks due to their Bitcoin exposure, they should be a small part of a diversified portfolio, not a core holding.