Money piles into Global X spot Bitcoin ETF after US regulators approve spot bitcoin ETF
\nThe SEC approval of Bitcoin ETFs is being compared to the launch of gold ETFs 20 years ago
\nGlobal X says financial advisors face several headwinds to recommending Bitcoin ETFs\u00a0<\/p>\n
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Australia\u2019s only provider of a spot Bitcoin ETF, Global X, says there has been strong inflows since the US Securities and Exchange Commission (SEC) approved spot bitcoin ETFs from a range of fund managers on January 10.<\/p>\n
However, senior product and investment strategist David Tuckwell told Stockhead <\/em>there remains challenges for the broad adoption of Bitcoin ETFs in Australia and the US.<\/p>\n The SEC approval will enable US investors to easily access the 15-year-old cryptocurrency through traditional securities exchanges with the world\u2019s largest economy.<\/p>\n Senior product and investment strategist David Tuckwell told Stockhead <\/em>it has seen \u201ca few million trickle in\u201d to the Global X\u2019s\u00a021Shares Bitcoin ETF (CBOE:EBTC)<\/strong>\u00a0in the past week or so.<\/p>\n EBTC and the Global X\u00a021Shares Ethereum ETF (CBOE:EETH)<\/strong><\/a>\u00a0track performance of the price of Bitcoin and Ethereum respectively in Aussie dollars.<\/p>\n \u201cOur Bitcoin ETF currently sits on a perfectly respectable $40 million in assets under management,\u201d he says.<\/p>\n \u00a0<\/p>\n Tuckwell says one of the problems cryptocurrencies have is most trading has taken place on unregulated platforms.<\/p>\n \u201cThey were very much operating outside of these very important guardrails established by regulators, which has consequences like we\u2019ve seen with FTX,\u201d Tuckwell says.<\/p>\n One of the world\u2019s largest crypto exchanges FTX filed for bankruptcy last year<\/a> with its founder Sam Bankman-Fried found guilty of money laundering and fraud.<\/p>\n \u201cBitcoin ETFs bring that trading out of an unregulated setting into a highly regulated marketplace,\u201d Tuckwell says.<\/p>\n \u201cWith that comes better outcomes for consumers with legal contingencies in place for consumers if something goes wrong.<\/p>\n \u201cThere is more screening of service provides and some of the conflicts of interest that have plagued these exchanges like FTX or Binance are removed.\u201d<\/p>\n \u00a0<\/p>\n Tuckwell says the SEC approval of Bitcoin ETFs is being compared to the launch of gold ETFs 20 years ago.<\/p>\n Interestingly,\u00a0 the first global gold ETF launched was Gold Bullion Securities, which listed on the ASX on March 28, 2003, by ETF Securities and its major shareholder, none other than Tuckwell\u2019s father Graham.<\/p>\n Seoul-based Mirrae Asset Financial Group, which owns Global X, bought out ETF Securities in 2022.<\/p>\n \u201cBefore gold ETFs came along 20 years the only real way people could invest in gold on exchanges was to invest in gold mining companies,\u201d Tuckwell says.<\/p>\n \u201cWhen gold ETFs came along a lot of people who owned shares in gold mining ETFs sold them off and bought gold bullion ETFs instead leading to a major run up in the gold price.\u201d<\/p>\n Tuckwell says many people are thinking with the SEC approval of Bitcoin ETFs there will be a re-run of the gold ETFs experience.<\/p>\n He says following the gold theory investors won\u2019t be limited to buying shares in Bitcoin mining companies on exchanges and instead will buy Bitcoin ETFs leading to structurally higher prices of the cryptocurrency.<\/p>\n \u201cIn my opinion, I don\u2019t think it will be as extreme as the gold case because the market capitalisation of these Bitcoin miners is far less than the gold miners, like Newmont, so there\u2019s less money to switch over,\u201d he says.<\/p>\n \u201cIt still has the market excited and will definitely be worth watching what happens in the coming years and months to the Bitcoin price as a result.\u201d<\/p>\n \u00a0<\/p>\n Tuckwell says spot Bitcoin ETFs work quite simply with an ETF issuer like Global X buying Bitcoin, which is held in the fund.<\/p>\n \u201cWe then issue ETFs against Bitcoin which the fund holds so if you own our Bitcoin ETF by extension you legally own a certain amount of Bitcoin,\u201d he says.<\/p>\n \u201cSpot Bitcoin ETFs work the same way as gold bullion ETFs which would buy a whole bunch of gold bars and stick them in a bank vault then issue units against those gold bars.<\/p>\n \u201cSo, if you own units in gold bullion ETFs by extension you are the legal owner of gold bars or part of one. It is very straightforward.\u201d<\/p>\n \u00a0<\/p>\n Tuckwell says the ETF industry in Australia and the US is driven primarily by financial advisors.<\/p>\n \u201cIt\u2019s not driven by millennials, and it\u2019s certainly not driven by people with loose change with the ETF market advisor driven,\u201d he says.<\/p>\n \u201cBecause of the legal issues which have plagued crypto exchanges, and because they don\u2019t connect into advisor platforms, financial advisors in Australia and the US have for the larger part steered clear.<\/p>\n \u201cMuch of the excitement is that Bitcoin ETFs do connect into the financial advisor platforms\u00a0 and infrastructure so there is potential advisor take up as well.\u201d<\/p>\n However, Tuckwell says under Australian laws advisors giving personal financial advice are required to possess competence in what they\u2019re giving advice on.<\/p>\n \u201cCrypto is not something that advisors are naturally fluent in, and the way advisors upskill is by professional accreditations but there aren\u2019t really any on the sector,\u201d he says.<\/p>\n Tuckwell says it is also not clear whether\u00a0 professional indemnity insurance for finance advisors provides coverage for crypto, still considered a volatile new asset class.<\/p>\n Tuckwell says ASX Clear<\/a>, which\u00a0is the sole provider of clearing services for Australia\u2019s equity markets, provides yet another obstacle for financial advisors in the crypto sphere.<\/p>\n \u201cASX Clear is an invisible engine room that drives our exchanges like CBOE and the ASX,\u201d he says.<\/p>\n \u201cWhenever any ETF or ASX 200 share trades, brokers are required to post what they call margin against the trade.\u201d<\/p>\n Tuckwell says it\u2019s like winning a house auction where you have to say put up a deposit representing a percentage of the house price.<\/p>\n \u201cWhere the sting in the tail for Bitcoin and Ethereum ETFs in Australia comes in is those margins are onerous,\u201d he says.<\/p>\n \u201cFor most ETFs in Australia you\u2019d be looking at ASX Clear margins of 10% but whereas for Bitcoin ASX Clear wants 40% and Ethereum they want 50%.<\/p>\n \u201cYou can imagine the balance sheet strain that translates into for brokers.\u201d<\/p>\n \u00a0<\/p>\n The jury is still out as to whether the SEC will approve an Ethereum ETF, with the deadline for the final decision in May.<\/p>\n SEC chairman Gary Gensler,\u00a0 a well-known critic of the crypto industry,\u00a0 cast doubt on doubt over whether it would follow Bitcoin and receive ETF approval.<\/p>\n \u201cImportantly, today\u2019s commission action is cabined to ETPs holding one non-security commodity, Bitcoin,\u201d Gensler said after the SEC decision.<\/p>\n \u201cIt should in no way signal the commission\u2019s willingness to approve listing standards for crypto asset securities.\u201d<\/p>\n The price of Ethereum has started to rally, despite the comments from Gensler.\u00a0 Tuckwell says successful legal proceedings against the SEC when they originally blocked Bitcoin ETFs may set the precedent for Ethereum ETFs to be approved as well.<\/p>\n \u201cIn my mind that\u2019s the market saying contrary to the public comments of its commissioner the SEC is going to or at least be forced to by courts approve Ethereum ETFs as well,\u201d Tuckwell says.<\/p>\n READ:\u2018Watershed day\u2019 \u2013 Aussie ETF providers react to US SEC approval of Bitcoin ETFs<\/a><\/strong><\/p>\n \u00a0<\/p>\n The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead. Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.<\/em><\/p>\n <\/span><\/p>\n The post The launch of bullion-backed ETFs shot gold into the stratosphere. Could SEC approval do the same for Bitcoin?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"ETFs regulate trading of Bitcoin<\/h2>\n
Will Bitcoin ETFs mirror golds rise?<\/h2>\n
How does a spot bitcoin ETF work?<\/h2>\n
Good and bad news for financial advisors<\/h2>\n
Bets on SEC also approving Ethereum ETF?<\/h2>\n