Americans don't need to wait, Canada has ETFs that hold bitcoin
Cryptocurrency investors in the U.S. are celebrating a milestone today, with the first day of trading for the first bitcoin ETF on the New York Stock Exchange.
But Canada has been ahead of the game for a while, with ETF options for U.S. investors.
The ProShares Bitcoin Strategy ETF (BITO) is based on futures contracts, which don't always track the physical price of bitcoin very well. The Securities Exchange Commission hasn't approved an ETF directly holding physical bitcoin (BTC-USD).
Greyscale has a trust (GBTC) that physically holds bitcoin. The trust structure can lead to differences between the fund's net asset value and the price of bitcoin. On Tuesday, Greyscale filed to convert it to an ETF.
Canadian regulators earlier this year approved ETFs that hold bitcoin directly. The first one launched in February from Purpose Investments on the Toronto Stock Exchange. The Canadian dollar-denominated, non-currency hedged version trades under the ticker symbol BTCC.B. American investors who want to use greenbacks have the U.S. dollar-denominated version's ticker as BTCC.U.
"An official ETF structure provides for daily liquidity and daily mark to market and market makers and their sole job is to ensure that the price of the ETF and the price of the net asset value of the ETF are directly linked and trading throughout the day that way," Som Seif, Purpose Investments' founder and CEO, told Yahoo Finance Canada in February.
"If you just hold futures and roll the futures, you will have a risk of underperforming bitcoin over time because it prices into a futures price as opposed to a current price."
Barriers to entry
Waseem Mamlouk, vice-president of capital markets for Nimbus DeFi, says a number of factors could be holding U.S. investors back.
"There may be custody concerns around the idea that the actual asset is being traded for them via a foreign-owned investment firm and there have always been security issues related to crypto custody, so that would be the most prominent reason but there are others for sure, including the ease of access just because there are trading desks and partners sitting in their own town who can now provide these services," he told Yahoo Finance Canada.
Depending on the brokerage, there could be more leg work involved too.
"Say an individual-use investor has an account with Robinhood, or Fidelity or Schwab in the U.S., they actually wouldn't be just able to buy it on their own," Vlad Tasevski, chief operating officer and head of product at Purpose Investments, told Yahoo Finance Canada. "What they would have to do is go through a bunch of approvals and pick up the phone manually to the order desk,"
"Ultimately, they will get it done. But there are many barriers."
Evolve launched a similar version of those ETFs that same week under EBIT for Canadian dollars and EBIT.U for U.S. dollars. Next came the CI Galaxy Bitcoin ETF BTCX-B for Canadian dollars and BTCX-U for U.S. dollars.
There are also a number of ethereum ETFs, (ETHH) (ETHH-U) (ETHR) (ETHR-U) (ETHX-B) (ETHX-U) a combination of bitcoin and ethereum (ETC) (ETC-U), and even an inverse bitcoin ETF to bet against it (BITI) (BITI-U).
With files from Jeff Lagerquist
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.
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