Bitcoin is off to a strong start in 2024, as US traders await SEC approval of the first issuance. TRUE The US Bitcoin ETF has undoubtedly been the cryptocurrency industry’s most elusive target over the past decade.
but Bitcoin ETFs It is, in fact, not new. We have been trading all over the world for years. Even in the Americas, crypto-based ETFs and mutual funds are ubiquitous, and things have gone well for these markets: no economic collapse, no chaos, and no threats to the sacred principles of democracy, despite what some have said. Lawmakers and lawyers. US regulators might say about cryptocurrencies. Instead, trading activity around these alternative assets has brought some life back to markets that have suffered from the pain of the global pandemic.
From Brazil and Chile to America’s neighboring countries to the north in Canada, investors in these markets have been looking to the future for some time with various cryptocurrency ETFs. These markets offer a peek at what US investors might expect when the Bitcoin ETF finally hits US soil.
Here’s how Bitcoin ETFs performed around the world:
Cryptocurrency ETFs in Brazil
Crypto ETFs on the Brazilian B3 exchange have seen a mixed set of returns over the past year. The best-performing funds were funds tracking heavyweight cryptocurrencies such as Bitcoin and Ethereum. The QBTC11 ETF, linked to the price of bitcoin via the CME CF Bitcoin Reference Price Index, is up 145% in 2023. The BITI11 and BITH11 funds, linked to the Bloomberg Galaxy Bitcoin Index and the Nasdaq Bitcoin Reference Price, posted similarly impressive returns of more than 100% in last year.
Performance of crypto ETFs in Brazil
Meanwhile, more niche cryptocurrency ETFs have struggled to keep up. The NFTS11 exchange-traded fund fell 45.71%, tied with the MVIS CryptoCompare Media & Entertainment Leaders Index covering NFTs and metaverse coins like Axie Shards, The Sandbox, Blur, and Apecoin. The META11 fund had a slight decline of 0.37%, tied to a composite index of Metaverse coins and crypto culture coins such as Apecoin, Decentraland, Shiba Inu, Polygon and Ethereum.
In total, the Brazilian Stock Exchange now hosts 13 cryptocurrency ETFs with assets under management of more than $285 million. Trading activity was brisk, with leading ETFs seeing daily volumes between $10 million and $725 million.
Although these funds still represent a small slice of total assets in Brazil, they have injected a dose of adrenaline into the ETF market in Brazil. Investors are seeking big returns from high-flying cryptocurrencies, while issuers are racing to bring more niche options to the market. Compared to other markets around the world, Brazil has already rolled out the red carpet for cryptocurrency ETFs.
HASH11, Brazil’s first cryptocurrency ETF, is the second most actively traded ETF in the country, trailing only IVVB11, which tracks the S&P 500. BOVA11, which tracks the Brazilian stock market (Bovespa), is third on the B3 list. .
How Bitcoin ETFs stack up against traditional ETFs in Brazil. Source: Economatica
Chilean interest in cryptocurrencies
While Brazil is moving forward with a wide range of cryptocurrency ETFs, Chile is taking a more measured approach to this digital asset class. In March 2021, the Santiago Stock Exchange welcomed its first Bitcoin ETF: the Purpose Bitcoin ETF from Canadian issuer Purpose Investments.
This leading USD fund trades under the ticker BTCCL and holds Bitcoin directly. By tracking actual Bitcoin rather than derivatives, it provides a transparent way to gain exposure. But with only one cryptocurrency ETF available so far, Chile is diving into these waters rather than diving in head first.
The ETF generated over $1 billion in assets under management just two weeks after its launch.
Besides BTCCL, Chileans have the option to trade Brazilian HASH11, but not as an ETF but as an investment fund that uses HASH11 shares as the underlying asset. This is an alternative solution that facilitates regulatory approval while still providing the security that institutional investors are looking for.
By the end of 2023, this fund reported assets under management of more than $145 million.
Cryptocurrency ETF Dominance in Canada
Canadians are also considered more cryptocurrency friendly than Americans when it comes to trading cryptocurrency ETFs. Since the first was approved in early 2021, these ETFs have allowed investors to participate in the cryptocurrency market through traditional investment accounts, including tax-advantaged savings accounts or registered retirement savings plans, making them attractive for long-term and tax-advantaged investments. efficiency.
Canadian cryptocurrency ETFs, particularly the Purpose Bitcoin ETF ($1.6 billion in assets) and the Purpose Ether ETF ($237 million in assets), provide simplified access to major cryptocurrencies. The Evolve Ether ETF, with $61.75 million, the Evolve Bitcoin ETF, with $144 million in assets, and the Evolve Cryptocurrency ETF with $28.6 million, diversify Ethereum options and combined exposure to cryptocurrencies.
On the low-fee end, the CI Galaxy Bitcoin ETF and Ethereum ETF manage $410 million and $94 million, respectively, attracting investors with fees of at least 0.4%. Likewise, Fidelity’s Advantage Bitcoin and Ether ETFs, which hold $140 million and $2 million respectively, provide reliable, low-cost entry points into the cryptocurrency market.
The 3iQ CoinShares Ether ETF and 3iQ CoinShares Bitcoin ETF are available to retail investors with $53 million and $38 million, respectively.
Why are Bitcoin traders so optimistic?
Cryptocurrency ETFs are changing the way people interact with cryptocurrencies, providing a bridge between traditional finance and the Wild West world that many associate with cryptocurrencies. For those who are not familiar with the heavy technical jargon of blockchains and digital wallets, these funds provide a simpler way to invest in cryptocurrencies. They package the complexity of cryptocurrencies into a familiar structure — much like traditional stocks — making them accessible to a wider audience.
This is why many people are optimistic about the approval of a Bitcoin ETF in the US. A pure Bitcoin ETF requires that the issuer manage the underlying assets and not the derivatives, which distinguishes spot Bitcoin ETFs from the Bitcoin futures ETFs currently trading in the US market.
This will likely have a major impact on Bitcoin and the crypto markets as a whole. In theory, all non-tech investors trading Bitcoin ETF shares will now be an indirect part of the BTC ecosystem, making it less vulnerable to manipulation due to the larger market size. Then there are expectations about asset scarcity.
There is only so much Bitcoin. If there is strong demand for Bitcoin ETF shares in the US, this buying pressure will make BTC more scarce because ETF issuers must hold a similar value in the underlying asset. Considering that the United States has the most active stock market in the world, we are talking about a potentially significant impact on currency liquidity. This is in addition to the Bitcoin halving, expected in April, which further limits the issuance of new Bitcoin every four years (roughly) as Bitcoin miners’ rewards are halved.
As regulations become clearer and technologies become more powerful, we can expect to see broader acceptance and spread of these funds. For investors, staying informed and cautious is key; For regulators, striking a balance between innovation and protection is crucial. Perhaps this is why the SEC has been slow for a decade. But with Bitcoin ETFs now about to begin trading in the US, the impact could change the course of the digital asset market.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.