Sunday, August 14

US Bitcoin ETF favors Australia approval, but Australians need to go further


On October 19, 2021, the ProShares Bitcoin Strategy ETF (BITO) was launched on the New York Stock Exchange. On its first day, the exchange-traded fund (ETF) saw an influx of close to $ 1 billion in natural volume and, within 24 hours, Bitcoin (BTC) would hit a new all-time high for its price in US dollars. This comes a week after the US Securities and Exchange Commission allowed the ETF application to expire, effectively giving the go-ahead for the product to move forward.

This marks a significant step for the United States, but has also had an impact on other markets globally. If BITO continues to be as well received as its first day would imply, more and more people are likely to want to follow suit. The ETF offers exposure to derivatives of Bitcoin futures contracts, not to Bitcoin itself. While purists may find this undesirable, it provides a remarkable degree of isolation for investors from the inherent volatility of Bitcoin. Other products in other markets with similar philosophies could help allay concerns that have kept institutional players at bay for years.

A success story in a market like the US certainly sheds a positive light on the outlook for similar funds around the world, and bringing exposure to Australian institutions represents a boon for both Bitcoin and the economy of the world. nation. More importantly, this has provided an opportunity for Australia to take the lead in financial innovation and fully bring cryptocurrencies to its financial herd.

And, for the most part, Australian lawmakers agree. A recent report published by the Australian Parliament Select Committee on Australia as a Technology and Finance Center proposed the framework that places Australia on an equal footing with the United States, the United Kingdom and Singapore.

The domino effect ETF

With that framework in place and following the success of BITO, Australian fund management company BetaShares has launched its Crypto Innovators ETF on the Australian Stock Exchange (ASX) under the symbol CRYP. Exposure to the fund allows investors to keep track of various cryptocurrency-focused companies, according to the Bitwise Crypto Industry Innovators 30 Index. The index’s core portfolio consists of major crypto entities, such as the prominent cryptocurrency exchange Coinbase, Bitcoin mining company Riot Blockchain and Michael Saylor-led business intelligence software company MicroStrategy.

The fund broke ASX records within 15 minutes of launch and accumulated nearly $ 31.3 million by the end of opening day.

Essentially, by holding company shares rather than particular crypto assets such as Bitcoin and Ether (ETH), the BetaShares ETF can provide interested clients with a unique opportunity to participate in the burgeoning digital asset market without having to buy. physically no crypto directly. In fact, BetaShares claims that 85% of its index analyzes companies that obtain a minimum of 75% of their income directly from the cryptocurrency market or, alternatively, own at least 75% of their assets in direct cryptocurrency holdings. This means maximizing long-term returns as Bitcoin matures, but it also minimizes the impact of a market reversal, which many believe is practically inevitable.

This has the potential to be transformative for both Australia and the wider crypto adoption. The launch of this ETF provides Australian investors and institutions with their first access to Bitcoin, and in a way that should allay their concerns around volatility. This, in turn, will generate more interest in the Bitcoin economy and should help drive the price of the asset. More importantly, it will be another example of this type of product in action that, hopefully, could inspire other markets globally. That said, Australia doesn’t need to wait for more global adoption when it should instead lead.

In a similar move, and right in Australia’s geographic backyard, New Zealand also saw the launch of its first Bitcoin ETF earlier this month in the form of a new offering. called Vault International’s Bitcoin Fund, or VIBF. VIBF is made up of carefully selected foreign-traded Bitcoin funds and other ETFs. It is the first of its kind to make its way down, which could further encourage regulators who are in the process of reviewing the first ETF of its kind in the Australian market.

Related: Australian senators pushing for the country to become the next crypto hub

What awaits us?

The first ETF exposed to crypto is a great development, but it should be the first drop in a big bucket. Frankly, the possibilities for crypto funds and derivatives are almost endless, given the great diversity available. Even without getting into risky small-cap projects, there are literally hundreds of reputable assets on the market. Just looking at major currencies like Ether and Solana could be the foundation for a variety of fund portfolios, but it’s when you step into top-of-the-line decentralized financial offerings that things get really interesting.

Liquidity mining, staking, and yield farming have the potential to dramatically increase returns, and when applied correctly these techniques don’t have to be too risky. Stablecoin’s liquidity funds, for example, mitigate the volatility inherent in the cryptocurrency market while generating higher returns than those found in traditional markets, providing a stable and profitable fixed-income vehicle for investors to use. investors explore it. The prospects for the Australian market are significant and being among the first major regions to engage could be a huge boost to the nation’s economy. Offering more exposure to retail products will also be essential to attract the entire population along with growth.

Related: Regulators are coming for stablecoins, but what should they start with?

In the future, if Australia can adopt this new asset class, it could very realistically see an injection of new capital into its markets and the economy in general, not much different than what we are seeing in the immediate aftermath of the US announcement. In addition, it would position Australia as a leader, inspiring other markets to benefit from the enormous advantage that can come from the implementation of cryptocurrency and its derivatives. Hopefully, those in power see what is happening and choose to lean on it.

This article does not contain investment advice or recommendations. Every trade and investment move involves risk, and readers should do their own research when making a decision.

The views, thoughts, and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Will hamilton is the head of trading and research for TCM Capital, which provides traditional capital markets and legal advisory services to the digital asset ecosystem. Will has been heavily involved in the cryptocurrency industry since 2016 and prior to this he worked at Pitt Capital Partners, Washington H. Soul Pattinson’s in-house investment bank, a Sydney-based investment house.