With over US$1.5trillion worth of cryptocurrency (crypto) assets in circulation, Bitcoin, and similar cryptocurrencies, are an asset class piquing the interest of investors.
Coinciding with the cryptocurrency market losing nearly 2/3rds of its value since their peak in late 2021, there has been a rise in exchange traded funds (ETFs) listed in Australia; giving exposure to crypto such as Bitcoin or Ethereum.
Recent market updates also saw the approval of Bitcoin-tracking ETFs by the US Securities and Exchange Commission (SEC). With the cryptocurrencies rally into this global news, questions surrounding Bitcoin and its place in an investors portfolio have resurfaced, both in Australia and around the globe.
There are currently three ETFs in Australia available for investors to gain exposure to crypto; following Cosmos Asset Management delisting DIGA, CBTC and CPET and BT3Q and ET3Q having also closed.
|BetaShares Crypto Innovators ETF
|Global X 21Shares Bitcoin ETF
|Global X 21Shares Ethereum ETF
Stockspot reviews and compares more than 250 ETFs in our annual Stockspot ETF Report.
In this article, I’ll analyse cryptocurrency ETFs in Australia, across a range of different metrics; to ensure investors make an informed choice.
We will explore:
CRYP was launched in late 2021 and has since become the largest crypto ETF, by size, with A$102 million net assets. CRYP broke the record for the fastest Australian ETF to reach $100 million from investors, achieving that milestone four days after launching. In 2022 EBTC launched, unfortunately timed prior to the crypto market fall of that year. EBTC currently has significantly less AUM, A$38.6 million, compared to ETFs such as CRYP. The disparity in ETF AUM could be in someway attributed to the unfortunate market timing of EBTC’s launch.
Costs and slippage
CRYP is the lowest cost crypto ETF with a management fee of 0.67% p.a. and spreads of 0.49% while other ETFs charge 1.25% p.a.
|BUY/SELL SPREADS (SLIPPAGE)
CRYP is the most liquid crypto ETF, trading almost $1.4 Million in average daily volume. By comparison, some of the most popular global share ETFs trade up to $10 million daily.
The second most liquid cryptocurrency ETF is EETH with liquidity at $136,000 per day.
Returns and track record
As all these ETFs are relatively new, they don’t have long-standing track records for analysis. Since its inception, CRYP has fallen ~33%. The three year performance sat at 1.62% where the 1 year was ~215%, demonstrating their volatility.
ETFs tracking cryptocurrencies have had a rocky start to their ETF life, launching prior to a period of price falls in the underlying crypto assets.
Research shows that new ETFs often launch just as retail interest is peaking and before a period of poor returns. We spoke to the AFR about this phenomenon just as these crypto currency ETFs were launching. While there have been strong gains visible in the 1 year return, many of these ETFs are still down since inception. This is one reason that Stockspot avoids niche thematic ETFs for clients, especially in their early stages of launch.
While some cryptocurrencies have had meaningful gains historically, they can also go through periods of large and severe price declines (such as 2011, 2015, 2018 and early 2022). I explore the volatility of Bitcoin’s market movements in more detail, in my article is now the right time to invest in Bitcoin?
|Index 1 Year Return
|Index 3 Year Return (p.a.)
|Index 5 Year Return (p.a.)
|Bitwise Crypto Innovators Index
|CryptoCompare’s Crypto Coin Comparison Aggregated Index (Bitcoin)
|CryptoCompare’s Crypto Coin Comparison Aggregated Index (Ethereum)
The below table also explores the early figures for the US cryptocurrency ETF market, comparing the top 4 ETFs.
|Total Assets ($MM)
|Grayscale Bitcoin Trust
|IShares Bitcoin Trust Registered
|Fidelity Wise Origin Bitcoin Fund
|ProShares Bitcoin Strategy ETF
Whether you want to invest in a pure Bitcoin ETF, Ethereum ETF or a more broad cryptocurrency industry ETF, will depend on your personal preferences.
Unlike other markets like gold, the crypto market is not yet mature, and has proven incredibly volatile in recent years.
CRYP gives exposure to companies involved in the crypto market providing more diversification by allowing non-pure play companies. For the underlying cryptocurrencies, investors need to determine if they want to gain access to crypto via a “feeder fund” that invests in an already existing overseas ETF, or own the underlying asset via a custodial cold storage wallet. For unhedged exposure, EBTC and EETH track the cryptocurrency in AUD, but you may wish to look at the USD alternative depending on your preference for a hedged or unhedged vehicle.
High-octane, and therefore highly speculative investments, like cryptocurrencies, can generate massive returns in a portfolio but also involve a greater risk. Investing too much, prior to a downturn, can lead to diminished returns and huge, long term, impact for investors. A balanced approach is always safest. The Stockspot 2022 ETF Report showed that investors in niche thematic ETFs lost over $100m in one year.
I would always recommend that if you want to invest in cryptocurrency, it should only account for a small part of your portfolio. Ensuring your investments are diversified, yet aligned with your risk appetite, like the portfolios we offer at Stockspot, will best place you in the long term, to weather market volatility.