The first Aussie crypto ETFs have kicked off, with many observers considering them to be a major moment for the digital assets industry Down Under, if not globally. But that acknowledgement comes with caveats, according to at least three Aussie-based industry experts.
The three crypto-focused exchange-traded funds to have launched on the Cboe Australia exchange so far include two from 21Shares (a Bitcoin one: EBTC and an Ethereum-specific one: EETH) and another from the Sydney-based Cosmos Asset Management – CBTC.
A couple more ETFs (Bitcoin and Ethereum focused respectively) are set to launch, too, from the large Canadian competitor 3iQ. (Stockhead spoke to 3iQ’s CEO and chairman Fred Pye last week regarding its Aussie market entry.)
So far, according to reports, the new 21Shares and Cosmos investment products haven’t exactly blasted off in terms of trading volume, although they did happen to launch in the middle of the Terra LUNA “stablecoin sh*tstorm” as Stockhead‘s Christian Edwards called it. It was one of the bloodiest weeks crypto has seen in a long time, and this week may not prove to be much better.
That said, it’s very early days for the funds, and 3iQ’s Fred Pye certainly believes it’s a decent time for them to launch.
“We’re actually lucky that Bitcoin is in a bit of a holding pattern here, so the funds will be established in your market by the time we have the next potential run up,” he told Stockhead. “I think the timing is is excellent for us.”
A question of accessibility?
Commenting specifically on the new Australian-market Bitcoin ETFs last week, Kraken Australia Managing Director Jonathon Miller labelled them “a significant milestone for the maturation of the digital assets space and a good measure of where Bitcoin is in its adoption journey”.
However, he added he also believes they don’t necessarily represent a “watershed moment for accessibility”, elaborating that crypto investors can already buy Bitcoin directly and “each layer of abstraction away from the underlying asset can add risk and cost”.
He went on to point out that crypto exchanges such as Kraken offer both institutional and retail clients onramp and offramp solutions with lower fees than ETFs traditionally charge.
“Until a similar value proposition is really in place, it’s hard to see how crypto ETFs will fit into the mix,” said Miller, adding: “Cosmos’ decision to waive fees for their Bitcoin ETF for the first two months is a positive step towards offering this, but it is not a long term solution.”
And how about diversification?
Similarly, Daniel Sekers – MD of Australian crypto trading and gift card platform YourPortfolio – described the new ETF launches as a “big step in the right direction for adoption of the asset class”. While CEO of crypto-wealth platform Dacxi, Ian Lowe, called them “another milestone in this ever-changing investment landscape”.
Also like Miller, however, both men pointed to the relatively high fees ETFs generally put in place. And they also both brought up the need for a diversified digital-assets portfolio, which they don’t believe the new ETFs currently provide, with just Bitcoin and Ethereum on offer. (Although those two coins are the two safest bets in crypto.)
“The key reason to hold an ETF is direct exposure to diversified assets,” claimed Sekers. “The newly formed ETFs are primarily holding two currencies – Bitcoin and Ethereum. With two main assets in the fund, this is unlikely to provide a diversified exposure to the asset class.”
“A Bitcoin ETF or an Ethererum ETF is not diversified across multiple blue-chip digital assets,” agreed Lowe, “meaning the holder misses out on the diversification traditionally offered to ETF investors.”
On that, though, Pye noted in his discussion with Stockhead that 3iQ hasn’t ruled out a wider range of crypto diversification in future, particularly into more smart-contract platforms beyond Ethereum. “In different markets, we’re looking at different products that would include other layer ones,” said 3iQ’s CEO.