What are Crypto ETFs?
An ETF or exchange traded fund is a basket of securities that follows the behaviour of an index, sector, commodities or a specific asset. These ETFs can constitute a single asset or a wide array of assets according to the diversification policy of the fund. Exchange traded funds are like regular funds but they can be traded freely on an exchange. A Brazilian firm launches crypto ETFs!
In the same way, cryptocurrency exchange traded funds track a bunch of cryptocurrencies on an exchange. A crypto ETF can either contain one digital asset or a basket of digital currencies.
Until today, only a Bitcoin ETF existed but there is news of an upcoming one in Brazil.
Introduction of the first Ethereum ETF
QR asset management, a Brazilian venture capitalist firm, has launched the first ever Ethereum exchange traded fund in Latin America. This announcement comes in less than a month of the listing of a Bitcoin ETF on the Brazilian stock exchange. The Ethereum exchange traded fund will be listed on the Brazilian stock exchange too. The ETF will be listed on the exchange of Sao Paulo under the ticker ‘QETH11’. The aim of the fund is to provide exposure of a digital asset other than Bitcoin to the people.
Ethereum is the perfect replacement to Bitcoin as it is the second largest cryptocurrency by market capitalization. Ethereum has essentially emerged as a hedge against aggressive investments in Bitcoin. In some cases, the features of Ethereum outshine those of Bitcoin. The transactions on the Ether blockchain are recorded within seconds whereas those of Bitcoin take minutes.
The QR asset management recognized this sentiment and has launched the first ever Ethereum exchange traded fund. As mentioned before, an ETF tracks an index, asset or commodity. This ETF will imitate the CME CF Ether Reference, an index of CME, the largest commodity exchange.
QR asset management will purchase a large proportion of Ethereum and offer investors exposure to it through this ETF.
Moreover, to ensure security of the purchased Ethereum, the custodial service of the asset has been outsourced to Gemini, a cryptocurrency exchange owned by the Winklevoss twins, Tyler and Cameron. Gemini is a trusted exchange having over $30 billion worth of crypto assets in its custody.
Has this fund launched other Crypto ETFs?
Yes, the venture capitalist fund has launched a Bitcoin exchange traded fund in the previous month. The Bitcoin fund, ticker: QBTC11, was listed on the Sao Paulo stock exchange, after receiving approval from the Brazilian Securities and Exchange Commission.
According to the CEO of QR capital, “The arrival of Bitcoin in the stock market is a historic moment for the crypto market and the conventional financial market as well.”
What are the benefits of Crypto ETFs to the company and the fund?
The introduction of Bitcoin and Ethereum ETFs will be more beneficial to the retail investors rather than institutions. The retailers will now be able to take exposure to these digital assets without actually having to purchase them directly. The retailers need not create an account with any crypto exchange in order to gain exposure to Bitcoin and Ethereum. They can simply purchase this ETF from their stock broker.
Being an ETF, the asset is highly liquid. Investors can buy and sell the exchange traded fund within a second. They can even conduct intraday trades on the ETFs. High liquidity attracts many investors to invest in the market. Bitcoin and Ethereum ETFs are more liquid than the prevailing safe haven, Gold. The existence of liquid options of cryptocurrencies can induce people to use Bitcoin and Ethereum has a hedge against inflation.
Moreover, the investors need not worry about the authenticity of the fund since the assets are securely stored under Gemini’s custody.
The benefits to the QR asset management company are also prominent. Being the first Ethereum exchange traded fund, the asset is likely to attract many investors. Moreover, this ETF is easily accessible to the public on the stock market of Brazil. This will spark a huge interest in the ETF owing to no competition in the market too.
The fund will be encouraged to launch more ETFs containing a pool of cryptocurrency assets in the long-term. Their revenue from operations is likely to surge from this stream and continue to gather a large interest in the market.