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Can ETFs in Australia do for Bitcoin what they did for gold trading?

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While most of the global cryptocurrency focus this week is on the turmoil and falling prices in the markets, three exchange-traded funds (ETFs) for cryptocurrencies quietly launched on Australia’s CBOE exchange, in another sign of acceptance of the asset class among financial market regulators. 

The names are a bit of a mouthful: Cosmos Purpose Bitcoin Access ETF, the ETFS 21Shares Bitcoin ETF, and the ETFS 21Shares Ethereum ETF. 

And with prices of the underlying Bitcoin and Ethereum tanking, it could be argued the launch was badly timed — the three funds attracted just over AU$2 million (US$1.4 million) on the first day, a lukewarm reception to what was a highly anticipated launch.

But David Tuckwell, product and research specialist at ETF Securities — the asset manager behind two of the funds — says the company expects the investment vehicles may reach AU$1 billion (US$690 million) by the end of the year.

“The appetite for [the ETFs] is simply huge,” Tuckwell said in an interview. “We’ve never seen anything like it before.”

While Tuckwell’s comments are to be expected from the company promoting the ETFs, his family does have an interesting track record with such investments.

His father led the charge to list the world’s first ETF for physical gold almost 20 years ago, a product at the time that some traders ridiculed, but was to later open up gold trading to many more investors. The question everyone wants answered is, could ETFs do for cryptocurrency what they did for gold?

ETF glister

Exchange-traded funds are a form of pooled security that track specific assets, which can be a basket of stocks or bonds, an industrial sector, a single commodity or other investments. 

ETFs are listed on exchanges, their prices fluctuating along with the underlying assets, and they can be used as a hedge, to diversify or for other purposes.

The world’s first ETFs started up in the 1990s in Canada, and by 2003 in Australia, Tuckwell’s father, Graham, was behind the idea of an ETF for gold that would give investors a regulated and secure method to trade the metal on a stock market. 

While gold is known as a traditional store of value, the metal itself is difficult and costly to store and transfer between buyers and sellers.  It was also a hard sell as an ETF 20 years ago.

Tuckwell said that when his father started to market the idea of a gold ETF in the early 2000s, potential customers were confused and assumed he was trying to sell EFTPOS point-of-sale terminals that process credit card payments at retailers. 

“He and his partners … sat people down and said, ‘We’re trying to make trade on the stock exchange,’ and they would laugh in his face,” Tuckwell said. 

The eventual product was the ETFS Physical Gold ETF that launched on the Australian Stock Exchange (ASX) in 2003 under the ticker GOLD.

Gold hit

It proved a hit with Australian investors, attracting more than AU$50 million (US$34.60 million at current exchange rates) of investment in the first six months.

In the following decade, gold prices jumped over 400% to a then-high of US$1,896, before falling back and then picking up again in late 2020 amid the economic uncertainty caused by the Covid-19 recession, reaching a new all-time high of US$2,058 that year, according to MacroTrends

“Looking back at the launch of the first Gold ETF, we saw a landmark event that shaped the next two decades of the gold market,” said Jeff Yew, CEO of Australia’s Monochrome Digital Asset Management — a firm also in the process of launching its own spot-traded Bitcoin ETF. 

While physical gold trading remains the leading driver — almost US$40 billion in average daily sales transacted on the London Bullion Market Association in March — gold ETFs globally attracted net inflows of US$3 billion in April

“[ETFs] became the primary way that most [retail investors] traded gold,” said Tuckwell at ETF Securities. “It’s all obvious 20 years later, but at the time it was by no means a sure thing.”

Digital gold

Bitcoin has been called “digital gold,” reflecting the view that it can be a store of value and an inflation hedge less correlated to financial markets, or similar to the traditional role of the physical metal.

That theory now has plenty of critics, because the price of Bitcoin and other cryptocurrencies have all fallen in tandem with global stock markets as the U.S. Federal Reserve and other central banks start to raise interest rates as inflation gains.

As that argument plays out, the emergence of crypto ETFs is still opening up the new asset class to a broader range of investors.

“A lot of people in the crypto industry have been so excited about [crypto] coming on board as an ETF,” Tuckwell said. “It lends legitimacy to the asset class.”

The crypto ETF funds are the first within Asia and may give some first-mover advantage to Australia, Tuckwell said. 

The world’s first ETF, the Purpose Bitcoin ETF (BTCC-B.TO), was listed on the Toronto stock exchange in early 2021 and now has more than CA$1.32 billion (US$1.02 billion) in Bitcoin assets under management.

U.S. market

The real legitimacy prize for Bitcoin aficionados is an ETF in the U.S., which so far the U.S. Securities and Exchange Commission (SEC) has yet to approve.

Last October, the SEC did give the green light for two futures-based Bitcoin ETFs, from ProShares and Valkyrie. Bitcoin hit its then all-time high of US$64,804 a few days after the ProShares Bitcoin Strategy ETF went live on the New York Stock Exchange

Futures ETFs tend to be more sentiment-driven, though indicate that regulators are warming to the asset, driving inflows into spot markets and driving the price higher, said Yew at Australia’s Monochrome Digital Asset Management.

Physically backed ETFs have a more direct impact on markets, he said. 

“In a bull market, [physically-backed ETFs have] the potential of soaking up supply and driving the asset price higher,” Yew said. “Inversely, in a bear cycle, it has the potential of contributing more sell pressure onto the global bitcoin market.” 

As the SEC makes its considerations, the release of the ETFs in Australia also had hiccups, with the original launch date of April 27 pushed back two weeks due to last-minute delays

ETF Securities told Forkast the delay was due to third-party brokers unfamiliar with cryptocurrencies, not with the fund itself or regulators.

It was frustrating to hit such roadblocks, said Kanish Chugh, Head of Distribution for ETF Securities. But “if we’re trying to be first, trying to innovate and we’re trying to bring something new for investors, you’re going to have those roadblocks and we’re going to have to overcome them.”



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