the The great success of the first Bitcoin exchange-traded fund will not have come as a surprise to cryptocurrency fans. But if you don’t know about ETFs, the place could have been surprising.
The explosive debut of the Purpose Bitcoin ETF (ticker BTCC), whose trading volume approached $ 400 million in shares in two days, did not happen in the largest ETF market. Nor was it in Europe, where similar listed products have already amassed about $ 6.5 billion in assets, according to data compiled by Bloomberg.
It was actually in Canada where the stock market is only 8% the size of the US and assets in ETFs total around $ 215 billion, less than the SPDR S&P 500 ETF Trust (SPY) by itself. It doesn’t register much beyond the ETF industry, but Canada has quietly built a reputation for this kind of hit.
“Canada has long been a leader in ETF product development,” said Ben Johnson, Global Head of ETF Research at Morningstar Inc. “Since the first ETF was listed to more recently becoming the home of the first ETF in psychedelics. “
BTCC launched in the Toronto Stock Exchange on Thursday, first fund of its kind in North America and the first anywhere to carry the ETF label. A day later, the Evolve Fund Group’s Bitcoin ETF (EBIT) debuted, but with a less impressive trading volume of around $ 14.5 million in shares.
As with many areas of innovation, deciding who or what came first in the financial world can come down to one definition, but most agree that the Toronto 35 index participation fund, or TIP, was the first iteration of a modern ETF in 1990. While it has not enjoyed the astronomical growth of the US industry, which began with the launch of SPY in 1993, the Canadian ETF market has frequently introduced products that have not been tested anywhere. another place.
|First in Canada||Release year|
|First Fixed Income ETF||2000|
|First Marijuana ETF||2017|
|First SPAC ETF||2020|
|First psychedelic ETFs||2021|
|First Bitcoin ETF||2021|
The reason comes down to a more agile and liberal regulatory environment and a focus on innovation. The Evolve fund, for example, was approved less than a month after an application was initially submitted.
“Canada has demonstrated that it has a process that leads to innovation and the systems that enable it,” said Som Seif, CEO of Purpose Investments.
In the US, the Securities and Exchange Commission has rejected multiple applications for a Bitcoin ETF, citing concerns that prices may be manipulated and liquidity is insufficient. That has left investors investing cash in the Grayscale Bitcoin Trust (GBTC), a riskier and more expensive structure that often trades at huge premiums over the value of its underlying assets.
“Canadian regulators seem to be much more willing to embrace innovation,” said Nate Geraci, president of the ETF Store, an advisory firm.
Read more: The $ 6 trillion ETF revolution started 30 years ago in Toronto
None of this is to say that the ultra-rich and highly liquid US market does not innovate. The first of a new ETF A format that hides your holdings against advance financing, called non-transparent active funds, debuted in the US in April 2020.
“Canada has been ahead of us in certain cases, but there are cases where the US is ahead,” said Ben Slavin, ETF director at BNY Mellon Asset Servicing. “I wouldn’t necessarily generalize that the US is always behind, it’s just that Bitcoin is an incredibly hot topic and it could be a special case.”
Meanwhile, there are many industry observers who would argue that Canada is not really first on the Bitcoin ETF. In Europe, there are several ETPs that behave almost exactly the same way, the largest of which has been in the market for more than five years. Regulatory differences simply result in a different label.
While other markets have surpassed the US in innovation, none can compete with the size and scale of the US market when it finally enters the fray.
Canada may have launched the first ETF, but the market in the US is now about 27 times bigger. There is about $ 70 billion in Canadian bond ETFs; south of the border, it’s $ 1.1 trillion and counting.
If a Bitcoin ETF finally makes its way to the US, the growth could be explosive. The closest alternative, Grayscale Bitcoin Trust, has around $ 34 billion in assets. Investors are even willing to pay a 7.5% premium currently to enter, and their average premium over its lifetime is 37%.
That’s yet another reason to approve an ETF, according to the proponents.
“It puzzles me that we still don’t have a Bitcoin ETF in the United States,” Geraci said on the ETF Store. “It is understandable that there can be a difficult balance between embracing innovation and ensuring adequate investor protection. However, given the existing Bitcoin products available to US investors, a Bitcoin ETF would appear to strike that balance. “
– With the assistance of Olivia Raimonde, Tom Lagerman and Divya Balji