On October 19, 2021, the ProShares Bitcoin Strategy (BITO) ETF was launched on the New York Stock Exchange. On your first day The Exchange Traded Fund (ETF) saw an inflow of nearly $ 1 billion in natural volume and in 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 approved the ETF application to expire, effectively giving the product the go-ahead.
This is a significant advance for the United States, but it also has implications for other markets around the world. If BITO continues to be as well received as the first day suggests, more and more people will probably want to follow suit. The ETF offers exposure to derivatives of Bitcoin futures contracts, not Bitcoin itself. While purists may find this undesirable, it offers investors a remarkable level of isolation from Bitcoin’s inherent volatility. Other products in other markets with similar philosophies could help allay concerns institutional players have held in check for years.
A success story in a market like the U.S. certainly sheds a positive light on the outlook for similar funds around the world, and exposure to Australian institutions can be a boon to both Bitcoin and the economy. More importantly, this gives Australia the opportunity to take the lead in financial innovation and fully bring cryptocurrencies into its financial herd.
And for the most part, Australian lawmakers agree. A recent report on Australia as a center of technology and finance, published by the Australian Parliament’s Special Committee, proposed a framework that would put Australia on an equal footing with the United States, the United Kingdom and Singapore.
The domino effect of ETFs
Against this background and after the success of BITO, the Australian fund management company BetaShares launched its Crypto Innovators ETF with the ticker CRYP on the Australian Stock Exchange (ASX). The exposure to the fund enables investors to keep track of various companies focused on cryptocurrencies according to the Bitwise Crypto Industry Innovators 30 Index. The main wallet of the index consists of large crypto units such as the well-known cryptocurrency exchange Coinbase, the bitcoin mining company Riot Blockchain and the business intelligence software company MicroStrategy, led by Michael Saylor.
The fund broke ASX records within 15 minutes of inception and amassed nearly $ 31.3 million by the end of the opening day.
Essentially, By holding company shares in lieu of certain crypto assets such as Bitcoin and Ether (ETH), the BetaShares ETF can offer interested clients a unique opportunity to participate in the burgeoning digital asset market without having to physically purchase any cryptocurrency directly. In fact, BetaShares claims that 85% of its index analyzes companies that generate at least 75% of their revenue directly from the cryptocurrency market or, alternatively, that hold at least 75% of their assets in direct cryptocurrency holdings. This means maximizing long-term returns as Bitcoin matures, but also minimizing the effects of a market reversal that many believe is practically inevitable.
This has the potential to be transformative for both Australia and the wider adoption of cryptocurrencies. The launch of this ETF provides Australian investors and institutions with their first access to Bitcoin, in a way that should allay their volatility concerns. This, in turn, will generate more interest in the Bitcoin economy and should help increase 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 around the world. However, Australia doesn’t have to wait for further global adoption, it should lead the way instead.
In a similar move and right in Australia’s geographic backyard, New Zealand launched its first Bitcoin ETF earlier this month in the form of a new offering called the Vault International Bitcoin Fund (VIBF). VIBF consists of carefully selected overseas traded bitcoin funds and other ETFs. It’s the first of its kind to find its way down, which could further encourage regulators reviewing the first ETF of its kind in the Australian market.
What can we expect?
The first ETF to be exposed to cryptocurrencies is a great development, but it should be the first drop in a big bucket. In all fairness, the possibilities of crypto funds and derivatives are almost endless given the huge variety. Even without getting into risky small-cap projects, there are literally hundreds of respectable assets in the market already. A look at major currencies like Ether and Solana could be the foundation of a wide variety of fund portfolios, but it’s only when you get into top of the line decentralized finance offerings that things get really interesting.
Liquid mining, staking, and yield farming have the potential to increase returns dramatically, and when used properly, these techniques don’t need to involve a great deal of risk. The stablecoin liquidity poolsFor example, they mitigate the volatility inherent in the cryptocurrency market while generating higher returns than those found in traditional markets, providing investors with a stable and profitable fixed income vehicle. The prospects for the Australian market are significant and being one of the first major regions to get involved could provide a huge boost to the country’s economy. A stronger presence in retail products will also be vital to attracting the entire population along with the growth.
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 from what we see from the United States immediately after the announcement.. In addition, it would position Australia as a leader and inspire other markets to reap the tremendous benefits that can come from implementing cryptocurrencies and their derivatives. Hopefully those in power will see what happens and decide to lean on it.
This article does not provide investment advice or recommendations. Every step of trading and investing involves risk, and readers should do their own research when making a decision.
The viewpoints, thoughts, and opinions expressed herein belong solely to the author and do not necessarily reflect the views and opinions of Cointelegraph.
Will Hamilton is Head of Trading and Research at TCM Capital, which provides traditional capital markets and legal advice for the digital asset ecosystem. Will has been a heavyweight in the cryptocurrency industry since 2016, prior to that at Pitt Capital Partners, the in-house investment bank of Washington H. Soul Pattinson, a Sydney-based investment firm.