The first Bitcoin (BTC) futures exchange-traded fund (ETF) was launched in the United States back on October 19, 2021. Since then, a number of othe
The first Bitcoin (BTC) futures exchange-traded fund (ETF) was launched in the United States back on October 19, 2021. Since then, a number of other cryptocurrency investment products have been launched in various markets.
That first ETF, the ProShares Bitcoin Strategy ETF, quickly became one of the top ETFs of all time by trading volume on its debut, and soon after, several other Bitcoin futures ETFs were launched in the United States, providing investors with different investment options.
To Martha Reyes, head of research at cryptocurrency trading platform Bequant, these options are important. Speaking to Cointelegraph, Reyes pointed out that in traditional finance, ETFs have “proved to be incredibly popular in recent years, with ETF assets expected to reach $14 trillion by 2024.”
Reyes said that investors who have been on the sidelines of the market may now choose to invest in cryptocurrencies if they prefer the “low cost, flexibility and convenience [of ETFs], especially as they then do not have to custody the crypto themselves.”
Custodying crypto assets, Reyes said, can prove a “technical barrier to some non-crypto natives.” The launch of crypto ETFs may offer investors the type of diversification they want in their portfolios through crypto, although some may want to access the market “via baskets reflecting different trends in this rapidly evolving market.” She added:
“Others prefer to be more hands on or have a combination of strategies. The important thing is that investors have options.”
Several options have, in fact, been launched over the last few weeks. United States-based firm WisdomTree has listed its cryptocurrency exchange-traded product (ETP), Crypto Mega cap Equal Weight ETP, on Euronext exchanges in Paris and Amsterdam.
Trading under the ticker symbol MEGA, the product is backed by physical cryptocurrencies including Bitcoin and Ether (ETH) and is rebalanced quarterly. WisdomTree also launched its WisdomTree Crypto Market (BLOC) and WisdomTree Crypto Altcoin (WALT) ETPs in Europe.
Similarly, in December, Bitcoin Capital AG released two ETPs on the SIX Swiss Exchange, offering investors exposure to Bitcoin and Ether. These products are actively managed by FICAS AG and are available to institutional, professional and private investors.
These products have so far been successful and more options are being launched on a regular basis, effectively boosting investors’ options in the market. To some experts, these products are part of the next step cryptocurrencies need to take to be widely adopted.
Investment products and adoption
To Reyes, participation in these investment products is so far “primarily institutional,” especially in countries like the United States in which only futures products are trading. She said that retail investors “are cognizant of the added rollover costs of a future versus a spot ETF, meaning underperformance versus the underlying.”
Reyes added that for “wide retail participation, we would probably need to see a spot product.”
Speaking to Cointelegraph Sui Chung, CEO of FCA-regulated crypto indices provider CF Benchmarks, said that cryptocurrency investment products are “significant drivers of mass adoption,” and while the firm would “like to see a wider choice of avenues” the impact of these products could still be significant:
“We shouldn’t underestimate the impact these products have in bringing new investors and capital to crypto assets and how this can accelerate long-term adoption.”
Karan Sood, CEO and managing director at Cboe Vest, an asset management partner of Cboe Global Markets, told Cointelegraph that increased participation from a diverse set of investors is “good for the market,” as it “increases liquidity and helps build out the market infrastructure.”
Sood said that before investing, investors should review their possibilities carefully as some products were initially launched to provide investors access to the cryptocurrency market, while others “try to provide a solution to Bitcoin’s extreme volatility problem.”
According to Sood, volatility is “endemic to the crypto asset space,” and sell-offs in which Bitcoin and other crypto assets lose over half of their value are fairly common, so much so that drops of over 20% are to be expected. He added:
“However, what is new is the availability of funds that allows investors to access Bitcoin exposure with strategies designed to reduce the impact of severe sustained declines.”
These funds, he said, take the “managed volatility set of investment strategies extensively used in conventional asset classes” and apply them to Bitcoin futures to protect investors against the cryptocurrency’s volatility.
This volatility is believed to be keeping some institutional investors on the sidelines and stopped regulators like the U.S. Securities and Exchange Commission (SEC) from finding ways to properly protect investors and accommodate for the innovation in the…
cointelegraph.com