US Bitcoin ETF supports Australian approval, but Aussies have yet to go further

On October 19, 2021, the ProShares Bitcoin Tactic ETF (BITO) debuted on the New York Stock Exchange. On its first day, the Exchange Traded Fund (ETF) recorded an outflow of nearly $ 1 billion in organic volume, and within 24 hours, Bitcoin (BTC) itself will hit a high for its price in US dollars. It does so a week after the US Securities and Exchange Commission let the ETF’s filing expire, which allowed the product to grow further.

This is an important step forward for the United States, but it has also made waves in other markets around the globe. If BITO continues to be as popular as it was on day one, more people will likely follow suit. ETFs provide exposure to Bitcoin futures derivatives, not Bitcoin itself. While purists may find this undesirable, it offers investors significant protection from Bitcoin’s inherent volatility. Other products in other markets with similar philosophies could help allay concerns that have plagued institutional investors for years.

A success story from a market like the US certainly illuminates the prospects for similar funds around the world, and exposure to Australian institutions would benefit both Bitcoin and the economy. More importantly, this has opened up the opportunity for Australia to be at the forefront of financial innovation and bring cryptocurrencies fully into its financial herd.

And Australian lawmakers largely agree. A recent report on Australia as a financial and technology hub by the Australian Parliament’s Special Committee proposed a framework to put Australia on an equal footing with the US, UK and Singapore.

ETF domino effect

Against this background and after the success of BITO, the Australian fund manager BetaShares launched its Crypto Innovator ETF with the ticker CRYP on the Australian Stock Exchange (ASX). The fund’s exposure allows investors to track various crypto-focused companies based on the Bitwise Cryptocurrency Industry Innovators 30 Index. The index’s core portfolio includes large crypto companies such as the popular crypto 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 its inception and raised nearly $ 31.3 million by the end of the opening day.

In essence, BetaShares ETFs can offer interested clients a unique way to get involved by holding a company’s shares in lieu of certain crypto assets like Bitcoin and Ether (ETH). In fact, BetaShares claims that 85% of its index includes companies that either generate at least 75% of their income directly from the crypto market or have at least 75% of their assets in trading. This is intended to maximize long-term returns as Bitcoin matures, but also to minimize the shock of market reversals, which many believe are practically inevitable.

This has the potential to be transformative for both Australia and wider crypto adoption. The launch of this ETF provides Australian investors and institutions with access to Bitcoin firsthand and in a way that could allay their volatility concerns. This will be of greater benefit to the Bitcoin economy and will help increase the price of the asset. More importantly, it will be another example of this type of product in action that, with luck, can inspire other markets around the world. However, Australia shouldn’t have to wait for further global acceptance, but instead should lead the way.

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 Vault Intercontinental Bitcoin.Fund, also known as VIBF. VIBF consists of hand-picked overseas listed Bitcoin funds and other ETFs. This is the first of its kind to go down, which may be further encouragement for managers in the process of considering the first such ETF in the Australian market.

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

What is still ahead of us?

The first crypto exposure ETF is a great development, but it has to be the first drop in a large group. To be honest, there are hardly any limits to the possibilities for crypto funds and derivatives given the diversity. Even without getting involved in risky small-cap projects, there are hundreds of reputable assets in the market. One look at the top coins like Ether and Solana can be the foundation of many fund portfolios, but when you’re into decentralized blue chip financial services things get really exciting.

Liquid mining, staking, and yield farming all have the potential to increase profits significantly and, when used correctly, these techniques need not involve too much risk. For example, the stablecoin liquidity pool minimizes the volatility inherent in crypto markets while offering higher returns than those found in traditional markets – an opportunity for fixed income securities that are stable and profitable for investors. The potential for the emergence of the Australian market is enormous and as one of the first major regions to enter the market it could really give the national economy a huge boost. Increased exposure to retail products will also be critical in bringing the entire population together.

Related: Regulators are coming to stablecoins, but where should they start?

Indeed, should Australia be able to adopt this new asset class in the future, it could see new capital inflows into its markets and the wider economy, unlike what we expect after the US announcement. Additionally, it will position Australia as a leader and inspire other markets to capitalize on the massive upward momentum that could result from the implementation of the cryptocurrency and its derivatives. Hopefully those in power see what is going on and decide to lean on it.

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