Investors rushing to capture the rising price of bitcoin made up almost 20 per cent of all Canadian exchange-traded fund sales last month.
Canadian ETFs recorded net sales of $5.8-billion in the month of February, with more than $1-billion in sales going into cryptocurrency bitcoin funds, according to data provided by National Bank Financial.
Bitcoin is a digital currency that is not backed by any country’s central bank. Launched in 2009, the cryptocurrency spiked in popularity in 2017 after reaching US$20,000 before plummeting more than 85 per cent in 2018. Today, the cryptocurrency has surged to US$58,000, piquing investors’ interest once again.
Purpose was the first out of the gate with a bitcoin fund trading under the ticker BTCC. The fund sold more than $260-million of shares throughout its first day on Feb. 18 and became the most actively traded ETF in Canadian history with a total of $630-million in assets after its first five days of trading. The fund hit $1-billion in total assets last week.
Evolve hit the market one day later and currently has just under $60-million in assets. Under the ticker EBIT, the Evolve fund slashed its management fee down to 0.75 per cent from 1 per cent after several days on the market to attract more investor attention.
“With the launch of these products, Canada has once again blazed a trail in the highly competitive ETF jungle,” Daniel Straus, director of ETFs and financial products research at National Bank, said in a monthly report.
“The first ETF ever [now iShares S&P/TSX 60 Index ETF] was launched in Canada [in 1990], as was the first-ever fixed-income ETF and the first currency-hedged ETF. Now, we have witnessed North America’s first ‘crypto-asset’ ETF after the asset class was born just over 10 years ago with the introduction of the bitcoin blockchain.”
In his report, Mr. Straus also cautions investors that crypto-assets and bitcoin are “extremely risky and speculative.”
The Canadian ETF industry has 39 providers managing approximately $269.2-billion in assets. Despite Purpose surging ahead with the first mover’s advantage for its bitcoin ETF, other asset managers are still looking to hit the market with their own versions of cryptocurrency funds.
On March 9, CI launched the country’s third bitcoin fund, CI Galaxy Bitcoin ETF. Under the ticker BTCX, the fund has the lowest management fee on the market at 40 basis points.
CI was an early adopter of bitcoin with the launch last year of a closed-ended fund, CI Galaxy Bitcoin Fund, that raised US$72-million in an initial public offering. The company has already filed with regulators to merge the fund with its ETF.
“We believe that our ETF is the preferred way for investors to access bitcoin versus a closed-end fund as our ETF will better reflect changes in the value of bitcoin while delivering greater convenience and cost-efficiency,” CI chief executive officer Kurt MacAlpine said in a statement.
Horizons ETFs Management (Canada) Inc., 3iQ Corp., Accelerate Financial Technologies Inc. and Arxnovum Investments Inc. have all publicly applied with regulators to list their own bitcoin ETFs that would also trade on the TSX. In addition, alternative-investment company Ninepoint Partners LP, which launched a closed-ended bitcoin fund in January, has applied with regulators to transfer its fund into an ETF.
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