Australian Crypto ETFs Fizzle on Debut, Only $2 Million in Volume

May 14, 2022, 1:30 PM AEST - 1 week ago

This week’s long-awaited launch of the first Australian crypto ETFs went off not with a bang but with a fizzle, as the investment products were released amid some of the darkest days in the history of crypto.

Since May 11 Australians have been able to invest directly in three Bitcoin and Ethereum exchange traded funds (ETFs) listed on Cboe Australia, through two providers. 

All three new crypto ETFs had trading volumes far below what was predicted, as the Terra blockchain collapse continued to wreak havoc across the entire crypto market, with Bitcoin plunging to levels not seen since 2020 and Ethereum falling to a six-month low.

All Three ETFs Attract Little Interest 

On their first day of trade, none of the newly launched funds was able to crack A$1 million in trading volume:

  • ETF Securities’ issued ETFS 21Shares Bitcoin ETF (EBTC) saw investor inflows of A$954,925. 
  • ETF Securities’ Ethereum fund ETFS 21Shares Ethereum ETF (EETH) attracted just A$604,305.
  • Cosmos Purpose Bitcoin Asset ETF (CBTC), issued by Sydney-based Cosmos Asset Management, fared worst, securing only A$454,002 in investor funds.

These numbers compare poorly with the launch of the BetaShares Crypto Innovators ETF (CRYP) – a fund that doesn’t invest directly in crypto but rather in crypto-related shares, such as Coinbase – which did over A$8 million in trade within 15 minutes of its listing on the Australian Securities Exchange (ASX). To be fair, though, that fund launched when Bitcoin was at an all-time high last November and the crypto market was on the ascent.

Why the Poor Start?

The new funds launched during a full-blown crisis in crypto markets, the magnitude of which we haven’t seen for years, if ever. It makes sense that concerned investors would be less inclined to get into crypto under current conditions.

The collapse of the Terra blockchain has sparked a US$450 billion drop in the overall crypto market cap since May 7, in a single week. According to CoinGecko, the price of Bitcoin has dropped by almost 25 percent in the past fortnight alone and now sits at US$29,531. 

In addition, the unusually high 42 percent margin requirement imposed on the new ETFs by national clearing authority, ASX Clear, has made the funds less attractive to market participants, meaning major brokers and platforms are refusing to support the ETFs.

Due to the high margin requirements and higher volatility of the underlying assets, some brokers who are selling the ETFs are also only allowing sophisticated investors to trade and are charging additional fees for the privilege.

Another factor likely affecting demand is that investors can already easily access Bitcoin and Ethereum directly, simply by purchasing the assets from a crypto exchange.

The race to launch the first crypto ETF in the Australia market was closely contested, with these three Australian-based crypto ETFs just beating out funds from Canadian challenger 3iQ Digital Asset Management.

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