Cryptocurrency Index Funds (ETFs), The Easiest Way To Invest In Crypto

Cryptocurrency Index Funds (ETFs), The Easiest Way To Invest In Crypto

The bitcoin ( BTC ), the largest cryptocurrency the world, draws attention for its high numbers: it has a high market capitalization (the number of criptomoedas outstanding) of $ 890 billion and is priced at US $ 47,700 ( or BRL 254 thousand ).

What many don’t know is that, despite the high price, both in dollars and in reais, cryptocurrency can be purchased in fractions, that is, if you want to buy R$100 in bitcoin, you will buy

This affordability happens because Satoshi Nakamoto , the anonymous creator of the Bitcoin system, wanted to create a safe, limited-supply (there will only be 21 million bitcoins in the world) and reliable asset that did not depend on central banks that print more and more money at your pleasure.

On October 31, 2008, Nakamoto spoke, in a ten-page document (also called a “ whitepaper ”) with information about his creation, about how he had created a cryptocurrency that did not depend on third parties — central banks, large investment banks, brokers etc.:

An electronic payment system based on proof of encryption rather than trust is needed , allowing two parties to transact directly with each other, without the need for a trusted third party.

Computationally impossible to reverse transactions would protect sellers from fraud and routine distribution mechanisms could easily be implemented to protect buyers.

On January 3, 2009 , the Bitcoin network went live, starting a market full of possibilities, but which only began to “take over” in mid-2017.

The idea of ​​the Bitcoin system was for users to have full access to their money and wallets, without having to pay high fees, if they bought an asset at a traditional brokerage.

These users would also not be limited to the market closing time (in Brazil, after 5 pm, the Stock Exchange closes) nor by their location , that is, it is a network that operates 24 hours a day, seven days a week, worldwide .

Over the years, more and more currencies have emerged, such as ether ( ETH ), stellar ( XLM ), XRP … Just out of curiosity, there are currently almost 12 thousand digital assets in this industry.

Of course, not all of these cryptoactives are reliable or investable , but they are out there for those who want to buy them…

The big headache for new crypto investors is understanding that it is possible to buy fractions of a cryptocurrency , how transactions work , how private keys and public keys work , how to set up a portfolio and, most importantly: how not to lose your assets .

Thinking to facilitate all these technical aspects, which can scare many people, several asset managers around the world have tried to present an investment product that unites the traditional market and the cryptocurrency market: index funds (“exchange-traded fund”) or ETFs.

Cryptocurrency ETFs are traded on a local stock exchange and are thus regulated by local authorities.

The idea is for them to be an easier and safer investment vehicle, since the manager would be in charge of purchasing, storing and managing these assets, preventing new users from spending sleepless nights thinking about the performance and safety of these assets.

The first company in the world to achieve the feat of listing a cryptocurrency broker was the Brazilian Hashdex which, in September 2020 , had obtained approval to list the “ Hashdex Nasdaq Crypto Index ETF ” ( HDEX.BH ), in partnership with Nasdaq , on the Bermuda Stock Exchange ( BSX ).

Many managers have tried to list crypto ETFs on the US stock exchange, but the US Securities and Exchange Commission ( SEC ) has always rejected these products, saying US investors could suffer from the high volatility of cryptocurrencies.

In August , SEC chairman Gary Gensler made it clear that the agency could approve a crypto ETF if that fund had exposure to crypto products already regulated in the market, such as bitcoin futures offered by the Chicago Mercantile Exchange (CME) .

Thus, many managers withdrew the request from their index funds, which would invest directly in bitcoin, and sent request to ETFs that would have exposure to bitcoin derivatives, that is, to products that already buy cryptocurrencies.

Are funds that invest in products that invest in bitcoin… Confused?

Fortunately, outside the US, other countries have obtained approval for their cryptocurrency index funds, such as Brazil and Canada.

In Brazil, two large asset managers have achieved this feat: Hashdex and QR Capital . Currently, there are five cryptocurrency index fund options on B3, the Brazilian stock exchange:

→ HASH11 – ETF that replicates an index composed of the largest cryptocurrencies in the market, managed by Hashdex and launched in April this year;

→ QBTC11 – ETF that has 100% exposure to bitcoin, managed by QR Capital and launched in June ;

→ BITH11 – ETF that replicates a fund that seeks to neutralize carbon emissions generated by bitcoin mining , managed by Hashdex and launched in August ;
→ QETH11 – ETF with 100% exposure to ether, managed by QR Capital and launched in August ;

→ ETHE11 – ETF with 100% exposure to ether, managed by Hashdex and released in August .

All of these assets are regulated by the Brazilian Securities Commission (CVM) and allow Brazilian investors from R$ 10 or R$ 50 to have exposure to the largest cryptocurrencies without having to deal with the technical aspects of buying them directly.

The expectation is that crypto ETFs approved in Canada would be a thermometer for approvals of these products in the US. Four Canadian managers listed a total of eight crypto ETFs:

→ BTCX.U – the “ CI Galaxy Bitcoin ETF ”, managed by CI Global Asset Management and launched in March, offers indirect exposure to bitcoin;

→ ETHX.U – the “ CI Galaxy Ethereum ETF ”, also managed by CI and launched in April, offers indirect exposure to ether;

→ EBIT – the “ Bitcoin ETF ”, managed by Evolve ETFs and launched in February, offers indirect exposure to bitcoin;

→ ETHR – the “ Ether ETF ”, also managed by Evolve and launched in April, offers indirect exposure to ether;

→ BITI ; BTI.U – the “ BetaPro Inverse Bitcoin ETF ”, managed by Horizons ETFs Management and launched in April , gives Canadian investors the opportunity to profit from falling bitcoin futures prices;

→ HBIT ; HBIT.U – the “ BetaPro Bitcoin ETF ”, also managed by Horizons and launched in April , helps fill the technical gap for investors who want indirect exposure to bitcoin;

→ BTCC ; BTCC.U – the “ Purpose Bitcoin ETF ”, managed by Purpose Investments and launched in February , offers indirect exposure to bitcoin;

→ ETHH ; ETHH.U – The Purpose Ether ETF , also managed by Purpose and released in April , offers indirect exposure to ether.

Cryptocurrency index fund options abound so, if you don’t want to miss the opportunity to invest in crypto but are still afraid or don’t know how to invest, consider ETFs as they are as easy to invest as stocks on the stock exchange.

The Great Writer and The Passionate Poet As Well, He Graduated from University Of Florida in Journalism and Brad have around 12 years of experience in news and media section.

Leave a Reply

Your email address will not be published. Required fields are marked *