The world’s first bitcoin exchange traded fund started trading on Thursday morning, allowing retail investors to more easily tap into the cryptocurrency craze that saw the price of Bitcoin (BTC) BT*0 surpass a new all-time high of US$52,000 on Wednesday.
Purpose Investments, the asset management arm of Purpose Financial LP, will begin trading its newest ETF on the Toronto Stock Exchange under the ticker BTCC, after receiving the green light last week from the Ontario Securities Commission.
“We are so happy to be able to offer this innovation to investors, making the process of owning bitcoin easier than ever,” Purpose chief executive Som Seif said. “We believe bitcoin, as the first and largest asset in the emerging cryptocurrency ecosystem, is poised to continue its growth trajectory and adoption as a alternative asset, further cementing the investment opportunity it presents.”
Purpose will manage the ETF and Ether Capital Corp., which has expertise in digital assets, will act as a special consultant to Purpose.
With a management fee of 1 per cent, the Purpose fund is the first of two bitcoin ETFs to hit the shelf this week.
ETF provider Evolve Funds Group Inc. announced it also received regulatory approval from the OSC on Tuesday and will begin trading its fund – The Bitcoin ETF – on Friday under the ticker EBIT.
“We have seen a lot of progress in bitcoin over the last couple of years,” Evolve CEO Raj Lala said in an interview. “The infrastructure and the institutional adoption has helped further legitimize it. Bitcoin has proven to be a store of value that is uncorrelated to other major asset classes – and has now emerged as an asset class itself.”
Cryptocurrencies such as bitcoin are not backed by any country’s central bank and can be highly volatile, often with price swings of more than 30 per cent in one day.
Earlier this month, industry analysts said the launch of bitcoin ETFs would allow retail investors to more easily access an asset class that has proven difficult for them to purchase through digital wallets. As well, ETFs would bring significant savings to those investors compared with closed-ended funds, which typically trade with large premiums to the underlying value of their assets – in some cases as much as 40 per cent.
The race to become the first Canadian asset manager to offer a bitcoin ETF has heated up in the past several weeks as the price of BTC began to hit all-time highs. But for some ETF providers, the race began began in 2017, when the price hit a peak of US$20,000 – only to plummet by 85 per cent shortly thereafter. Now, with the race reinvigorated, a handful of asset managers are still in line in hopes of receiving approval from regulators.
Horizons ETFs Management (Canada) Inc. , Accelerate Financial Technologies Inc. and newcomer Arxnovum Investments Inc. have all publicly applied with regulators to list bitcoin ETFs that would also trade on the TSX.
Earlier this week, investment manager 3iQ Corp. – the company that paved the way for bitcoin closed-ended funds after winning a three-year battle with the OSC for approval to launch QBTC:TSX – also joined the fray of investment managers filing for an ETF.
“With the success of our bitcoin closed-end fund, it is a natural progression for us to file for a physical bitcoin ETF to enhance our product suite in the growing digital asset space,” 3iQ CEO Fred Pye said in a statement.
Other closed-ended fund providers could also follow into the ETF market. In December, Toronto-based CI Financial Corp. completed a US$72-million IPO for its CI Galaxy Bitcoin Fund , while alternative-investment company Ninepoint Partners LP, also of Toronto, filed a prospectus to launch a similar closed ended investment called Bitcoin Trust .
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Clare O’Hara