Harvest ETFs Dives into Bitcoin with Innovative Income-Driven ETFs on Cboe Canada

In a bold move to capitalize on investor demand for cryptocurrency exposure, Harvest ETFs has launched two Bitcoin-focused exchange-traded funds (ETFs) on the Cboe Canada exchange: the Harvest Bitcoin Enhanced Income ETF (HBIX) and the Harvest Bitcoin Leaders Enhanced Income ETF (HBTE). These ETFs, which began trading on April 30, 2025, aim to provide income through covered call strategies while offering leveraged exposure to Bitcoin’s price movements or the broader Bitcoin ecosystem.

The ETFs at a Glance

Both ETFs are structured to appeal to income-focused investors but differ in their exposure to Bitcoin:

HBIX: Direct Bitcoin Price Exposure

• Strategy: HBIX invests in Bitcoin-focused ETFs or portfolios to track the price of Bitcoin. It employs 25% leverage to amplify returns and writes covered call options on up to 50% of its holdings to generate steady income.
• Distributions: Pays $0.24 CAD quarterly, with the first distribution set for June 9, 2025.
• Risk Profile: High volatility due to Bitcoin’s price swings and leverage, with no hedging against USD/CAD exchange rate fluctuations.

HBTE: Ecosystem Exposure

• Strategy: HBTE invests in publicly traded companies active in Bitcoin’s ecosystem, such as miners, exchanges, and treasury holders. Its top holdings include MicroStrategy (MSTR), Galaxy Digital (GLXY), and Coinbase (COIN). It uses 25% leverage and covered calls to stabilize returns.
• Distributions: Offers $0.33 CAD monthly, aligning with its focus on steady income.
• Risk Profile: Exposed to Bitcoin’s volatility indirectly and the performance of individual companies, alongside currency risk.

Key Investment Considerations

Leverage and Covered Calls: Both ETFs use 25% leverage, which amplifies gains but increases losses. The covered call strategy reduces volatility by selling call options, though it caps upside potential.

Currency Exposure: Since the ETFs are denominated in USD but priced in CAD, investors face risks from fluctuations in the USD/CAD exchange rate. For example, a 5% CAD appreciation against the dollar could erode returns by that margin.

Distribution Risks: Distributions may exceed earnings, leading to a return of capital, which reduces the ETF’s net asset value (NAV). As of April 30, 2025, HBTE’s NAV was $12.03 CAD, with AUM of $1.2 million CAD—a small size that could amplify volatility.

Competing ETFs and Market Context

Harvest’s ETFs join existing Bitcoin-themed products on Cboe Canada, such as Global X’s BCCC and BCCL, which also use covered calls but lack the ecosystem focus of HBTE. The monthly distribution of HBTE stands out compared to quarterly or annual payouts in many competitors, potentially attracting income-seeking investors.

Why Harvest’s Approach Matters

Harvest ETFs, with $6 billion in AUM, brings credibility to the space through its covered call expertise, a strategy it has refined across equities and fixed income. The firm’s philosophy of balancing income with capital appreciation aligns with its new Bitcoin ETFs, which target long-term growth while mitigating risk through derivatives.

Conclusion: A High-Risk, High-Potential Play

The launch of HBIX and HBTE underscores the growing institutional acceptance of Bitcoin as an investable asset. However, these ETFs are not for the faint-hearted. Their high-risk profile—driven by leverage, cryptocurrency volatility, and currency exposure—demands careful scrutiny.

Investors should note:
- Bitcoin’s Volatility: Over the past year, Bitcoin’s price has fluctuated by over 40% monthly on average, as seen in the chart below.
- Leverage Impact: A 10% Bitcoin price drop could lead to a 12.5% loss in HBIX or HBTE due to their 25% leverage.
- Income Sustainability: Monthly distributions of $0.33 CAD (for HBTE) equate to a 2.75% annual yield at its April 30 NAV of $12.03.

While these ETFs offer a novel way to access Bitcoin’s ecosystem and price movements, they are best suited for aggressive investors with a long-term horizon and a tolerance for significant risk. For others, traditional Bitcoin ETFs or direct cryptocurrency holdings may remain preferable. Harvest’s entry, however, signals a trend toward more sophisticated crypto-themed products—proof that the asset class is maturing, even as risks remain.

As Harvest’s CEO, Michael Kovacs, noted: “These ETFs bridge the gap between Bitcoin’s growth potential and the need for income.” Whether they succeed depends on whether investors are ready to embrace that gap.