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Summary
- Horizon ETF Management has launched the first inverse Bitcoin ETF, allowing investors to short crypto much in the same way investors can short a stock.
- Crypto ETFs provide an opportunity for mainstream investors to invest in cryptocurrency as there is less security risk and fewer hassles compared with investing in crypto directly.
- The BetaPro Inverse Bitcoin allows investors to purchase short term futures, which investors buy anticipating that the value of crypto will fall.
- The introduction of the inverse ETF provides some resistance to what has been a bear race in the crypto market so far.
- The ASX has said it might launch its first ETF by the end of the year.
It wasn’t that long ago that the term “cryptocurrency” or “Bitcoin” conjured up the image of a tech geek tapping away at the keys of a laptop or, worse still, somebody looking to purchase illicit substances (or services) on the dark web, particularly on the now-defunct Silk Road.
Fast forward less than five years and not only have cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETC) become part of popular vernacular in the world of finance but also many cryptocurrencies have risen in value to levels which most of the few people who knew about cryptocurrencies five years ago would not believe.
Canada recently launched two cryptocurrency exchange-traded funds (ETF) - BetaPro Bitcoin ETF (HBIT) and BetaPro Inverse Bitcoin ETF (BITI), which will allow investors to take long and short positions on the digital class.
Canada launched two cryptocurrency ETFs recently (Source: © 9194202| Megapixl.com)
Despite the meteoric rise and popularity of cryptocurrency as an asset class in general, many investors remain cagey about adding a crypto investment to their portfolio.
Enter the crypto ETF.
Specifically, the BetaPro Bitcoin ETF (TSX:HBIT, S&P:HBIT.U) and the BetaPro Inverse Bitcoin (TSX:BITI, S&P:BITI.U). These crypto ETFs allow investors to purchase long and short term futures for the price of a management fee of 1.45%.
The two ETFs, launched last month by Horizons ETF Management, are currently listed on the Toronto Stock Exchange, and it is providing a gateway for more traditionally minded investors to capitalise on the current crypto boom.
Source: © Mohammedsoliman4| Megapixl.com
What is a Crypto Exchange-Traded Fund?
A crypto ETF tracks digital tokens much like a regular ETF tracks an index, commodity, sector or other assets. Like how regular ETFs can contain a variety of investments, including stocks, bonds and commodities, a crypto ETF can track a wide variety of crypto coins.
Cryptocurrency ETFs are traded like any other common stock and are subject to investors buying and selling it, resulting in its varying value throughout the day.
Source: © Ivelinr | Megapixl.com
The value of Bitcoin has skyrocketed in the past twelve months, rising from AU$13,395 this time last year to AU$69,630 today – an increase of approximately 550%.
On April 23, 2021, Bitcoin suffered a significant loss after massive crypto sell-off across the board, likely caused by concerns that the Biden administration was planning to increase capital gains tax in the future.
Despite Bitcoin’s and other altcoins success, it has historically been difficult for investors to access them. This is where ETFs become helpful for those investors who want to dip their toe into the crypto market but don’t want the hassle of dealing with online security and setting up crypto wallets as they’re traded much like any other asset listed on the stock exchange.
Why Invest in Crypto ETFs?
The first and foremost attraction is convenience. By purchasing ETFs, an investor does not need to go through the hassle of buying a crypto wallet or dealing on unregulated exchanges. There have been that instances where investors in Bitcoin have lost the key to their wallet. In these instances, there is no customer service number to call to retrieve access to an account. Consequently, these investors have devastatingly forgone hundreds of thousands and even millions of dollars.
Another advantage of ETFs is that the investor is dealing with a trusted business. The crypto market is still really the Wild West with practically no regulations. It can be challenging to ascertain whether some companies have actual real human beings managing it. On the other hand, ETFs are issued by regulated companies so the risk of being burnt by a scam company is reduced to zero.
The disadvantages are minimal apart from fees that an investor in an ETF would typically be charged, which would not be the case if an investor were to purchase crypto directly.
It is also true that tracking of ETFs is not always accurate as the price of a particular coin will not always be reflected in the ETF price.
Coinbase Goes Public Opening the Possibility of a Level Playing Field
Earlier in April, popular cryptocurrency exchange, Coinbase made its debut on Wall Street, taking a direct listing route over the more traditional IPO.
RELATED: Coinbase Valuation Tops US$100 Billion on IPO Debut
This was yet another step in taking cryptocurrency to a more mainstream market. Immediately following Coinbase’s debut, the value of Bitcoin rose to a record high of AU$63,700 and a market cap of AU$1.7 trillion.
Coinbase’s effect did not stop at Bitcoin, however, as Ethereum – the world’s second-largest cryptocurrency – also hit a record high of US$2,228.28.
Bull vs Bear
Coinbase’s introduction to the mainstream market contrasted with the introduction of inverse ETFs creates an interesting dichotomy. The former will likely continue to generate a bull market, with the latter likely to produce a bear market as investors try to short on the future of crypto.
Bull vs Bear Concept (Source: © Mast3r| Megapixl.com)
Until the introduction of the reverse crypto ETF, the bull market has by and- large dominated the crypto world. The ‘greater fool’ theory, which, However, with the Beta Pro Inverse Bitcoin, Canada May well have created a more level playing field.
The ASX May Feature its First ETF by Year’s End
Cryptocurrency is set to become mainstream in the Australian market, with the country’s first ETF to be introduced by the end of the year possibly.
ASX General Manager, Max Cunningham, said that crypto has become so mainstream it can no longer be ignored.
Although the ASX does not discuss potential future listings, it is currently assessing multiple ETF applications with some sources confident that it will happen by the end of 2021.
