Australia’s first crypto ETFs have arrived. Here’s what you need to know.

by

Jack Derwin

May 11th 2022 3 minute read

This week the first Australian crypto ETFs are launching, representing another major milestone for Bitcoin and Ethereum. Here’s what you need to know.

First of a kind

When the BITO ETF launched late last year on Wall Street, it was the first Bitcoin ETF to make it to the world’s largest market.

Its launch was historic. Almost US$1 billion flowed through it on day one, making it the second most-traded ETF on record.

Significantly however, the fund itself didn’t hold Bitcoin directly. Rather it traded Bitcoin futures, or price fluctuations of the digital asset.

The first Australian crypto ETFs are different in that these funds will actually hold coins directly. To date, the U.S. regulator hasn’t approved a Wall Street equivalent to list putting Australia ahead of America in that respect.

Australian crypto ETFs

At 10am on Thursday, three different crypto ETFs will be launched in Australia. 

Two of those will be Bitcoin funds managed by ETF Securities (Ticker:EBTC) and Cosmos Asset Management (Ticker:CBTC). ETF Securities is also offering a pure Ethereum fund, listed as EETH.

What’s the big deal?

Firstly, these crypto ETFs are a far cry from others launched late last year in Australia. While FTEC and CRYP allowed investors to buy into companies involved with cryptocurrencies and blockchain technology, it didn’t give them direct exposure to crypto itself. 

Unlike BITO, this new crop of funds will also be backed by actual Bitcoins and Ether, with the assets to be held in ‘cold storage’ for added security.

This week’s launch is also meaningful in that it is the first time investors will have the opportunity to invest in cryptocurrency via regulated exchanges. Rather than having to open new accounts and manage cryptocurrency wallets themselves, they can trade ETFs with their usual trading platforms and cut out the extra administration. 

It could also further open up the opportunity for institutional investors, such as superannuation funds, to invest in the emerging asset class on behalf of members. 

While cryptocurrencies remain an unregulated financial product in Australia, their location within an ETF provides investors with a different avenue to gain exposure. The funds must, according to regulatory approvals, have their private access keys backed up with the security of the funds to be overseen by a custodial expert. 

Higher costs

It should be noted however that those insurances come at a cost. Both ETF Securities and Cosmos Asset Management’s funds carry a management fee of 1.25%, significantly higher than many other passive ETFs.

While this may not bother investors who believe in the long-term potential of Bitcoin and Ethereum, it may prove too expensive for those who would prefer to simply buy and hold the assets themselves.

Conclusion

Either way, Australia’s first crypto ETFs mark yet another stage of the cryptocurrency story and, for some investors, another opportunity to grow their wealth.

Interested in crypto ETFs? All three will be available on Thursday to Superhero investors from $0 brokerage. Sign up to the platform today for free.