Fri. Jan 21st, 2022

On October 19, 2021, ProShares Bitcoin Strategy ETF (BITO) was launched on the New York Stock Exchange. On its first day, the exchange-traded fund (ETF) experienced an inflow of close to $ 1 billion in natural volume, and within 24 hours, Bitcoin (BTC) itself would reach a new record high level for its price in US dollars. This comes a week after the US Securities and Exchange Commission allowed the ETF’s application to expire, which actually made it okay for the product to move on.

This marks a significant step for the United States, but has also sent ripples to other markets globally. If BITO continues to be as well received as its first day would suggest, then it is likely that more and more people will follow suit. The ETF offers exposure to derivatives from Bitcoin futures contracts, not Bitcoin itself. While purists may find this undesirable, it provides a remarkable degree of isolation for investors from Bitcoin’s inherent volatility. Other products in other markets with similar philosophies could help alleviate the concerns that have kept institutional actors at bay for years.

A success story out of a market like the US certainly sheds a positive light on the prospect of similar funds across the globe, and bringing exposure to Australian institutions will be a boon to both Bitcoin as well as the nation’s economy. More importantly, this has given Australia an opportunity to take the lead with financial innovation and bring cryptocurrency right into its financial flock.

And for the most part, Australia’s legislators agree. A recent report published by the Australian Parliament’s Committee on Australia as a technology and financial center proposed the framework that puts Australia on an equal footing with the United States, the United Kingdom and Singapore.

ETF domino effects

With that framework in place and following the success of BITO, the Australian fund management company BetaShares has launched its Crypto Innovators ETF on the Australian Stock Exchange (ASX) under the ticker CRYP. Exposure to the fund allows investors to track various crypto-focused companies based on the Bitwise Crypto Industry Innovators 30 Index. The index’s core portfolio consists of large cryptocurrencies such as prominent cryptocurrency exchange platform Coinbase, Bitcoin mining company Riot Blockchain and Michael Saylor-led business intelligence software company MicroStrategy.

The fund broke ASX records within 15 minutes of launch and raised nearly $ 31.3 million by the end of opening day.

Basically, BetaShares’ ETF, by holding corporate shares over certain cryptocurrencies such as Bitcoin and Ether (ETH), can give interested customers a unique opportunity to participate in the booming digital asset market without having to physically buy crypto directly. In fact, BetaShares claims that 85% of its index looks at companies that derive an absolute minimum of either 75% of their revenue directly from the crypto market, or alternatively hold at least 75% of their assets in direct crypto holdings. This stands to maximize long-term returns as Bitcoin matures, but also minimizes the shock of a market turnaround that many believe is virtually inevitable.

This has the potential to be transformative for both Australia as well as broader cryptoadoption. The launch of this ETF gives Australian investors and institutions their first access to Bitcoin, in a way that should soothe their concerns about volatility. This in turn will bring greater interest in the Bitcoin economy and should help strengthen the price of the asset. More importantly, it will be yet another example of this type of product in action, which with a little luck could inspire other markets worldwide. That said, Australia does not have to wait for more global adoption when they should be leading instead.

In a similar move, and right in Australia’s geographical backyard, New Zealand also saw the launch of its first Bitcoin ETF earlier this month in the form of a new offering called the Vault International Bitcoin Fund or VIBF. VIBF is composed of carefully selected offshore-listed Bitcoin funds and other ETFs. It is the first of its kind to come down below, which may further encourage regulators who are in the process of reviewing the first such ETF in the Australian market.

Related: Australian senators are pushing for the country to become the next crypto hub

What lies ahead?

The first crypto-exposed ETF is a great development, but it should be the first drop in a big bucket. Honestly, there is almost no end to the possibilities for cryptocurrencies and derivatives, given the great diversity that is available. Even without getting into risky, small-cap projects, there are literally hundreds of reputable assets already on the market. Just looking at the best coins like Ether and Solana could be the basis for a variety of fund portfolios, but it is when you get into the blue-chip decentralized financing offerings that things get really interesting.

Liquidity mining, staking and dividend farming all have the potential to significantly increase returns, and when used correctly, these techniques do not have to carry too much risk. Stablecoin liquidity pools, for example, mitigate the volatility of the cryptocurrency market while offering higher returns than those found in traditional markets – providing a stable and profitable interest-bearing instrument for investors to explore. The opportunities for the Australian market are significant, and being among the first major regions to get engaged could actually be a huge boost to the country’s economy. Offering increased exposure to retail products will also be crucial to bringing the entire population together with growth.

Related: Regulators come for stack coins, but what should they start with?

Going forward, if Australia can embrace this new asset class, it can very realistically see an injection of new capital into its markets and the wider economy, not unlike what we see on the heels of the US announcement. Furthermore, it will position Australia as a leader, and inspire other markets to take advantage of the massive upside that may come from the implementation of cryptocurrency and its derivatives. Hopefully they see with power what is happening and choose to lean in.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Will Hamilton is head of trading and research at TCM Capital, which provides traditional capital markets and legal advice to the digital asset ecosystem. Will has been heavily involved in the cryptocurrency industry since 2016, and before that he worked at Pitt Capital Partners, the internal investment bank of Washington H. Soul Pattinson, an investment house based in Sydney.