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The First Crypto ETF Has Hit the Market. But Will the U.S. See One?

The First Crypto ETF Has Hit the Market. But Will the U.S. See One?
ByMatthew Makowski
  • PublishedFebruary 19, 2021

The U.S. doesn’t have a crypto ETF yet. But the first North American crypto ETF has debuted on the Toronto Stock Exchange (TSX). It’s another sign that crypto is rapidly moving toward the mainstream.

The crypto ETF is real now.

In its first hour of existence, TSX’s Purpose Bitcoin ETF saw more than $80 million in volume… proving that not only is there acceptance for such an investment vehicle, but also a whole lot of demand.

In a press release leading up to the new ETF, Purpose Investments CEO 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 an alternative asset, further cementing the investment opportunity it presents.

The Purpose ETF is the first of its kind in the world (though similar securities have been available on some European exchanges). But at launch, it was the only one backed by settled Bitcoin. Also worth noting: There are two tickers for it on the TSX. The Canadian dollar-denominated ETF trades under the ticker BTCC.B. The U.S. dollar-denominated ETF trades under the ticker BTCC.U.

The ETF will be managed by Purpose Investments. The asset management company also brought in Ether Capital Corporation to act as a consultant due to its experience with digital assets.

Ether CEO Brian Mosoff cited Bitcoin’s growing popularity as one of the reasons for the venture. The move makes Bitcoin more accessible to investors via the ETF. And this crypto ETF is almost sure to inch cryptocurrency closer to the mainstream.

The First of Many Crypto ETFs

While Purpose gets the honor of introducing the first crypto ETF to North American markets, it won’t be the last. The Ontario Securities Commission (OSC) has already approved the second Bitcoin-backed ETF.

Like the Purpose ETF, Evolve Funds Group’s Crypto ETF (TSX: EBIT) offers investors direct exposure to Bitcoin. Those holding shares of EBIT will have actual Bitcoin in their portfolios. This will reduce the need for some to sign up for specialty crypto wallets and exchanges in order to invest in crypto.

While this is good and exciting news for our northern neighbors, it’s also a harbinger of things to come in the U.S. For quite some time, regulators have been hesitant to approve a crypto ETF. The release of such a product was seen as risky due to the possibility of market manipulation and concerns over storing the digital assets. But some of those hesitations appear to be in the rearview mirror.

Both Purpose and Evolve worked closely with the OSC to greenlight these projects, which were months in the making. However, even though these offerings are available, the OSC has stalled on other such crypto ETFs.

But now that there is a blueprint for what works, the floodgates are expected to come open in Canada. And it’s likely the U.S. will follow suit.

As ETF research analyst at Bloomberg Intelligence James Seyffart told CoinDesk, “It’s a promising sign if there are no issues with launching a bitcoin ETF in Canada… The U.S. regulatory framework tends to be a lot more in line with things that happen in Canada.”

Naturally, several U.S. companies are champing at the bit to be the first to offer a crypto ETF of their own.

Yet the U.S. Lags Behind

VanEck filed with the U.S. Securities and Exchange Commission to launch a digital asset-related ETF back in January. And NYDIG Asset Management has also filed paperwork with the SEC to launch a Bitcoin ETF. While there’s reason to be hopeful about these, the result remains to be seen.

For the time being, U.S. investors will have to settle for over-the-counter Bitcoin investments. Grayscale’s exchange-traded trusts, such as its Bitcoin and Ethereum trusts, are good examples.

Nonetheless, Bitcoin and cryptocurrencies as a whole have a lot of momentum on their side. In fact, as the ball was dropping on 2020, our own crypto expert Andy Snyder deemed 2021 the “Year of Crypto.” And so far, he’s been spot-on. It would only make sense that 2021 be the year the U.S. ushers in crypto ETFs.

The Bottom Line on Crypto ETFs

It’s already been a heckuva year for crypto. Bitcoin smashed though the $40,000 and $50,000 mark. Tesla (Nasdaq: TSLA) announced it will be accepting Bitcoin as payment. There’s reason to believe Apple (Nasdaq: AAPL) might be developing a relationship with cryptocurrencies. And maybe – just maybe – Mastercard will be introducing crypto to its network soon.

And as these crypto ETFs eventually come to market, it only reinforces a key point Andy has made time and time again: Crypto shouldn’t be seen as an alternative to the dollar. That’s only a small part of its value.

Cryptocurrencies are a transformation in technology… they are the next generation of digital commerce. And soon enough, they’ll be considered a vital part of any properly diversified portfolio.

If you’re looking for a place to get started with cryptocurrencies before these crypto ETFs are available, we suggest signing up for Andy’s Manward Digest e-letter. He’s more than happy to share his in-depth insight to help others get started in crypto.

Written By
Matthew Makowski

Matthew Makowski is a senior research analyst and writer at Investment U. He has been studying and writing about the markets for 20 years. Equally comfortable identifying value stocks as he is discounts in the crypto markets, Matthew began mining Bitcoin in 2011 and has since honed his focus on the cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dogs Dorito and Pretzel.

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