Cryptocurrency ETFs struggle to attract investors amid market volatility
Four weeks on from their much anticipated launch, the country’s first listed cryptocurrency funds are struggling to attract investors amid volatility and negative sentiment.
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Four weeks on from their much anticipated launch, the country’s first listed cryptocurrency funds are struggling to attract investors amid volatility and negative sentiment towards the asset class.
New figures show the four largest exchange-traded funds on Cboe Australia – previously Chi-X – have some $9m in assets under management. This compares to about $131.3bn in assets across the entire sector.
The first cryptocurrency ETFs off the mark included Cosmos Asset Management’s bitcoin fund and two funds run by ETF Securities – one offering bitcoin and the other ethereum. Both debuted on May 12 after significant difficulty in meeting margin rules imposed by monopoly clearing authority ASX Clear.
Now, the largest of those funds is ETF Securities’ 21Shares Bitcoin ETF – which had just over $4.2m in assets as of June 9. It was the most active with $343,000 worth of trades so far this month.
The second biggest is its twin fund, the 21Shares Ethereum ETF, which has $2.76m in assets. Third was rival fund Cosmos Purpose Bitcoin Access ETF, which has $1.58m in assets under management, while its newer ethereum alternative has $280,000.
Canada-based 3iQ debuted two crypto ETFs last Thursday on Cboe – the 3iQ CoinShares Bitcoin Feeder ETF and the 3iQ CoinShares Ether Feeder ETF. They had local traded values of $125,529 and $115,037 respectively as of Friday.
By comparison, the Canadian debut of the Purpose Bitcoin ETF last year saw assets swell beyond $1bn in the first month. ProShares’ Bitcoin Strategy ETF traded $US1bn ($1.43bn) worth of shares on its first day listed on the NYSE last year.
Cosmos Asset Management chief executive Dan Annan said the launch of the firm’s ETFs at a time when cryptocurrencies had lost a lot of value was not “ideal”.
“From a time perspective when there are concerns of inflation … it certainly wasn’t the best time, but you can’t control the market and with crypto you always have to take a long-term approach,” Mr Annan said on Monday.
“But we are certainly meeting our objective, which is to deliver simplified and stable access to the asset class of crypto.”
Mr Annan added that investors with a long-term view of bitcoin and cryptocurrency would see that now was a good opportunity to enter the market.
“With volatility comes opportunity and by understanding how cryptocurrency works then you better position yourself to reap the benefits over time,” he said.
Since the ETFs listed, the value of bitcoin has dropped about 16 per cent. It was trading at $US24,760 on Monday evening, while ethereum was down more than 36 per cent in the last 30 days to about $US1270.
The lower-than-expected uptake of cryptocurrency ETFs was due to investors waiting for volatility to subside, said ETF Securities head of distribution Kanish Chugh. “This is not exclusively a crypto problem, with the general investment sentiment negative across all growth equity products,” Mr Chugh. While ETF Securities had hoped for more impact from their ETF products, Mr Chugh said they still had a place in a wider investment market once the volatility stabilised.
“To have these products trading is already a win in itself for us and we expect big demand when the time comes for investors to want these products that will be here waiting for them,” he said.
“Bitcoin is the safe haven, except unlike gold, it is a growth alternative that people view as being more stable than other cryptocurrencies … Ethereum is like the infrastructure sector and has more risks attached to it.”
ASX Clear requires margins of 40 per cent on bitcoin ETFs, and 50 per cent on ethereum ETFs, which has also hampered demand. That made participants including nabtrade and Bell Direct think twice about the products.
While many remained on the sidelines, others including CommSec, CMC Markets and Superhero did support trading.
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Originally published as Cryptocurrency ETFs struggle to attract investors amid market volatility
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