the roaring success of the first fund traded on the Bitcoin exchange was not a surprise for fans of cryptocurrencies. But if I don’t know about ETFs, the place could have been amazing.
The explosive debut of The purpose of the Bitcoin ETF (ticker BTCC), whose trading volume approached shares worth $ 400 million in two days, did not happen on the largest ETF market. Nor in Europe, where similar products traded on the stock exchange have already raised assets of about $ 6.5 billion, according to data compiled by Bloomberg.
It was actually in Canada – where the capital market is only 8% the size of the US and ETF assets total about $ 215 billion – less than the SPDR S&P 500 ETF Trust (SPY) on your own. It doesn’t go far beyond the ETF industry, but Canada has quietly built a reputation for this type of coup.
“Canada has long been at the forefront of ETF product development,” said Ben Johnson, global director of ETF research at Morningstar Inc. “From the listing of the first ETF to the recent emergence of the first psychedelic ETF.”
BTCC launched on Toronto Stock Exchange on Thursday, the first fund of its kind in North America and the first anywhere to carry the ETF label. A day later, the Evolve Fund Group Bitcoin ETF (EBIT) started, but with a less impressive trading volume of shares worth about $ 14.5 million.
As in many areas of innovation, deciding who or what was first in the financial world can come to definition, but most agree that the Toronto 35 participation fund or TIPs was the first iteration of a modern ETF in 1990. Although it did not enjoy the astronomical growth of American industry – which began with the launch of SPY in 1993 – the Canadian ETF market frequently introduced products that had not been tried anywhere else.
| Canada Firsts | Launch year |
|---|---|
| The first ETF | 1990 |
| The first fixed income ETF | 2000 |
| The first marijuana ETF | 2017 |
| The first SPAC ETF | 2020 |
| The first ETF for psychedelics | 2021 |
| The first Bitcoin ETF | 2021 |
The reason is a more agile and liberal regulatory environment and an emphasis on innovation. The Evolve Fund, for example, was approved less than a month after the initial application was submitted.
“Canada has proven to have a process that leads to innovation and systems that allow this,” said Som Seif, CEO of Purpose Investments.
In the US, the Securities and Exchange Commission rejected several applications for a Bitcoin ETF, citing worries that prices can be manipulated and liquidity is insufficient. This has allowed investors to invest cash in the Grayscale Bitcoin Trust (GBTC), a riskier and more expensive structure that often trades with huge premiums on the value of its core assets.
“Canadian regulators seem more willing to embrace innovation,” said Nate Geraci, president of the ETF Store, a consulting firm.
Read more: The $ 6 trillion ETF revolution began 30 years ago in Toronto
None of this means that the extremely rich and extremely liquid American market is not innovating. The first in a new ETF a format that hides its stakes against front-funning – called non-transparent active funds – debuted in the US in April 2020.
“Canada has been ahead of us in some cases, but there are cases where the US is ahead,” said Ben Slavin, head of ETFs for BNY Mellon Asset Servicing. “I wouldn’t necessarily generalize that the US is always behind, just that Bitcoin is an incredibly hot topic and could be a special case.”
Meanwhile, there are a lot of industry observers who would argue that Canada is not really the first in the Bitcoin ETF. In Europe, there are several ETPs that behave in almost the same way, the largest of which has been traded for more than five years. Regulatory differences only lead to a different label.
While other markets have overtaken the US in terms of innovation, none can compete with the size and size of the US market when it finally enters.
Canada may have launched the first ETF, but the US market is now about 27 times larger. There are about $ 70 billion in Canadian bond ETFs – south of the border it is $ 1.1 trillion and it counts.
If and when a Bitcoin ETF finally arrives in the US, the growth could be explosive. The closest alternative, the Grayscale Bitcoin Trust, has assets of about $ 34 billion. Investors are even willing to pay a premium of 7.5% at present to enter, and its average premium over its lifetime is 37%.
This is yet another reason for approving an ETF, according to supporters.
“I’m confused that we don’t have a Bitcoin ETF in the US yet,” Geraci told the ETF. “It is understandable that there may be a difficult balance between adopting innovation and providing adequate protection for investors. However, given the existing Bitcoin products available to US investors, a Bitcoin ETF would seem to strike this balance. ”
– With the assistance of Olivia Raimonde, Tom Lagerman and Divya Balji