Global Bitcoin ETFs: A Years-Long Trading Saga Unveiled

Bitcoin has surged into 2024 with impressive momentum, as U.S. traders eagerly anticipate the SEC’s approval of the first true Bitcoin ETF in the country—a milestone the crypto industry has pursued for the last decade.

However, Bitcoin ETFs are not a novel concept internationally. They have been trading globally for years. Across the Americas, various ETFs and crypto-based mutual funds are prevalent, and the outcomes have been largely positive. Despite concerns from some U.S. lawmakers and regulators, these markets have not experienced economic collapse, social upheaval, or threats to democratic principles. Instead, the trading of these alternative assets has injected vitality into markets that were previously weakened by the global pandemic.

From Brazil and Chile to Canada, investors have been exploring cryptocurrency ETFs for some time. These international markets provide a glimpse into what U.S. investors might anticipate when a Bitcoin ETF is finally approved in the United States.

Here’s a look at the global performance of Bitcoin ETFs:

Brazil Cryptocurrency ETFs

Crypto ETFs on Brazil's B3 exchange have experienced varied returns over the past year. The standout performers were funds tracking major cryptocurrencies like Bitcoin and Ethereum. The QBTC11 ETF, which follows the Bitcoin price via the CME CF Bitcoin Reference Rate index, soared with gains of 145% in 2023. Similarly, the BITI11 and BITH11 funds, linked to the Bloomberg Galaxy Bitcoin Index and Nasdaq Bitcoin Reference Price respectively, also achieved impressive returns of over 100% last year.

Conversely, more specialized crypto ETFs faced challenges. The NFTS11 ETF, anchored to the MVIS CryptoCompare Media & Entertainment Leaders Index—covering NFT and metaverse coins like Axie Shards, The Sandbox, Blur, and Apecoin—dropped 45.71%. The META11 fund, tied to a composite index of metaverse and crypto culture coins including Apecoin, Decentraland, Shiba Inu, Polygon, and Ethereum, saw a slight decline of 0.37%.

Currently, Brazil's exchange hosts 13 crypto ETFs, collectively managing over $285 million in assets. Trading activity has been robust, with leading ETFs experiencing daily volumes ranging from $10 million to $725 million.

Although these funds represent a small fraction of Brazil's total assets, they have significantly energized the ETF market. Investors are drawn by the potential for high returns from prominent cryptocurrencies, while issuers strive to introduce more niche options. Compared to global markets, Brazil has been particularly welcoming to crypto ETFs.

HASH11, Brazil’s first crypto ETF, ranks as the second-most traded ETF in the country, surpassed only by IVVB11, which tracks the S&P 500. BOVA11, which follows Brazil’s stock market (Bovespa), holds the third spot on the B3 exchange.

Chile's Approach to Crypto

While Brazil surges ahead with a diverse range of crypto ETFs, Chile has opted for a more cautious approach to this burgeoning asset class. In March 2021, the Santiago Stock Exchange introduced its first Bitcoin ETF: the Purpose Bitcoin ETF, issued by Canada’s Purpose Investments.

This groundbreaking fund, trading in U.S. dollars under the ticker BTCCL, directly holds Bitcoin, offering a transparent method for investors to gain exposure to the cryptocurrency by tracking its actual value instead of relying on derivatives. Despite its innovative nature, Chile has limited its foray into the crypto ETF market to this single fund, signaling a cautious entry rather than a full-fledged commitment.

The Purpose Bitcoin ETF saw remarkable success, surpassing $1 billion in assets under management just two weeks after its launch.

In addition to BTCCL, Chilean investors can access Brazil’s HASH11, albeit not as an ETF but as an investment fund that uses HASH11 shares as the underlying asset. This approach facilitates regulatory approval while offering the security that institutional investors seek.

By the end of 2023, this fund managed over $145 million in assets, reflecting a growing but measured interest in cryptocurrency investments within the Chilean market.

Canada's Leadership in Cryptocurrency ETFs

Canadians have shown a greater propensity for trading crypto ETFs compared to their American counterparts. Since the approval of the first one in early 2021, these ETFs have enabled investors to engage in the digital currency market through traditional investment accounts, including tax-free savings accounts (TFSAs) and registered retirement savings plans (RRSPs), enhancing their appeal for long-term investments and tax efficiency.

Leading the pack are Canadian cryptocurrency ETFs like the Purpose Bitcoin ETF, with $1.6 billion in assets, and the Purpose Ether ETF, with $237 million in assets, providing streamlined access to major digital currencies. The Evolve suite of ETFs, including the Evolve Ether ETF ($61.75 million), Evolve Bitcoin ETF ($144 million), and Evolve Cryptocurrencies ETF ($28.6 million), offers diverse options for Ethereum and combined crypto exposure.

On the lower fee end, the CI Galaxy Bitcoin ETF and Ethereum ETF manage $410 million and $94 million, respectively, attracting investors with a minimal 0.4% fee. Similarly, Fidelity's Advantage Bitcoin and Ether ETFs, holding $140 million and $2 million, respectively, provide trusted, low-cost entry points into the cryptocurrency market.

Additionally, the 3iQ CoinShares Ether ETF and 3iQ CoinShares Bitcoin ETF cater to retail investors, managing $53 million and $38 million, respectively.

The Reasons Behind Bitcoin Traders' Optimism

Cryptocurrency ETFs are transforming how individuals engage with digital currencies, bridging the gap between traditional finance and the often chaotic world of crypto. For those not versed in the tech-heavy jargon of blockchains and digital wallets, these funds offer a straightforward way to invest in cryptocurrencies. By packaging the complexity of crypto into a familiar structure similar to traditional stocks, they become accessible to a broader audience.

This accessibility is a key reason why many are optimistic about the approval of a Bitcoin ETF in the United States. A pure Bitcoin ETF requires the issuer to manage the actual underlying asset, not derivatives, distinguishing it from the Bitcoin futures ETFs currently available in the U.S. market.

The approval of a spot Bitcoin ETF could significantly impact Bitcoin and the broader crypto market. By enabling non-tech savvy investors to trade shares of a Bitcoin ETF, it broadens the BTC ecosystem, potentially reducing market manipulation due to the larger market size. Additionally, there's the aspect of Bitcoin's scarcity.

With a limited supply of Bitcoin, strong demand for Bitcoin ETF shares in the U.S. could increase BTC's scarcity as ETF issuers would need to hold equivalent amounts of the underlying asset. Given that the United States boasts the most active stock market globally, this could have a significant impact on Bitcoin's liquidity. Moreover, the upcoming Bitcoin halving, expected in April, will further reduce the issuance of new Bitcoin, as miner rewards are halved approximately every four years.

As regulations become clearer and technologies more robust, broader acceptance and proliferation of these funds are likely. For investors, staying informed and cautious is essential; for regulators, balancing innovation with protection is crucial. This cautious approach might explain the SEC's decade-long delay. However, with Bitcoin ETFs now poised to start trading in the U.S., the impact could be transformative for the digital asset market.

Bottom Line

The journey of Bitcoin ETFs reflects the evolving landscape of digital asset investments, with each milestone shaping the future of crypto trading. From Brazil to Canada, and now potentially in the United States, these funds are democratizing access to cryptocurrencies, making them more approachable for a wider audience.

The anticipation surrounding the approval of a Bitcoin ETF in the U.S. underscores the growing optimism among traders. Not only does it promise to expand the BTC ecosystem, but it also has the potential to enhance market liquidity and mitigate manipulation risks.

As regulatory frameworks mature and technology advances, the acceptance and proliferation of crypto ETFs are expected to accelerate. Investors must stay vigilant and well-informed, navigating this dynamic landscape with caution.

With Bitcoin ETFs on the horizon, poised to reshape the digital asset market, we stand at the cusp of a new era in cryptocurrency trading.