Bitcoin ETFs, and cryptocurrency wannabes

If there is a solid calculation that proves that the death of crypto has been greatly exaggerated, it is the number of access points for investors to buy crypto.

• There are more than 150 cryptocurrency exchanges globally, according to research firm ETFGI. Together, they have nearly $ 11 billion in assets under management.

• The United States is responsible for three of them, ETFGI managing partner Deborah Fuhr tells Axios, and talks about how restrictive US regulators are.

Why it matters: People want an easy, direct way to invest in crypto, as they invest in stocks and bonds, but regulators have not yet approved them.

So far, the Securities and Exchange Commission has only approved ETFs that hold bitcoin futures, which investors use to trade at the price they think bitcoin will strike, without actually owning any bitcoin.

Details: ETFs are vehicles that can hold virtually any asset, whether they are stocks, bonds or commodities like gold – but not for crypto, at least not directly, in the US

• Spot bitcoin ETFs exist as real ETFs: In Canada.
• In Europe, these are structured as exchange-traded Products (ETPs). The vast majority of ETPs are ETFs, but some are technically different.
• For example, Fidelity’s Physical Bitcoin ETP, which was launched on the German Xetra Exchange earlier this year, is a debt instrument.

Status in the game: Grayscale’s application for a spot bitcoin ETF was rejected by the SEC in June, setting the company’s plans to convert the Grayscale Bitcoin Trust of $ 14 billion into an ETF.

• The Bitcoin vehicle, often referred to by the symbol “GBTC”, is technically not a fund, but a trust.
• GBTC, due to this structure, lacks the flexibility that ETFs make to create and remove stocks, without disturbing the underlying assets.

The way Grayscale’s product works is like closed funds. Because only Grayscale can create or remove stocks from the market, and the firm does, through private placements and redemptions that are only available to accredited investors, when the company wants it.

• Accredited investors are those who have a net worth of more than $ 1 million or an income of over $ 200,000 a year.

How it works: The great thing about an ETF is that through the use of individuals or companies called «authorized participants», shares can be created and removed from the market as needed, by exchanging them for pro-rata parts of the portfolio they represent.

• This creation / redemption mechanism is what keeps an ETF’s price close to the net asset value of the ETF’s underlying assets.
• It can also benefit from fewer taxable events than, say, an equity fund.

What’s up: Regulators and wannabe spot bitcoin ETF issuers seem to have come to a dead end in the US, with ETFs continuing to submit applications in the face of serial rejection.

Be smart: It’s because being first cases.

• Remember that the first bitcoin futures ETF launched by ProShares reached assets under management of $ 1 billion … in just days.
• Valkyrie and VanEck ETFs followed shortly after that, but saw less inflow.

The other side: Nevertheless, a “whirlwind” of crypto-ETP activity outside the United States is showing a flourishing supply of crypto investment vehicles.

• “In Canada, there are real bitcoin ETFs – regulation in Canada has been very different from the rest of the world,” said Fuhr of the ETFGI. “They have real ETFs on bitcoin, ethereum, etc.”
• “In Europe, they are structured as ETPs, with the first coming first from Scandinavia and then many from Switzerland. Then Germany and Euronext embraced them,” she said.

ETF issuers from Brazil to Australia reach across jurisdictions to offer their products, according to Fuhr.

• “Brazil has had crypto for a while, so some Brazil issuers go to Europe. Australia has ETPs, but reaches Canada and Europe for the underlying exposure,” Fuhr said.

Except for the ETFs that track bitcoin futures, As professional investors use to place indirect trades on bitcoin, US investors will also find funds (ETFs included) that hold cryptocurrencies.

• They tend to have a mix of mining companies, categorically fintech companies like Coinbase and Robinhood and crypto stores like Galaxy Digital and is, Voyager Digital.
• Note: Voyager Digital’s shares are facing delisting on the Toronto Stock Exchange after filing for bankruptcy last week.

Crystals thought bubble: In the United States, the options available are few and mostly indirect games on crypto, unless you are rich or well versed in native crypto transactions.