1st Bitcoin ETF in North America hits $1 billion in assets
Greg Taylor, Purpose Investments CIO, joins Yahoo Finance’s Kristin Myers to discuss outlook of the 1st Bitcoin ETF and growth in cryptocurrency.
Video transcript
- The first Bitcoin ETF, that's BTCC from Purpose Investments, has hit $1 billion in assets. So let's bring in Greg Taylor, Purpose investments Chief Investment Officer. So Greg, your Bitcoin ETF-- that's BTCC, as I just mentioned-- launched very recently, in February. What has the demand been like in just this short time?
GREG TAYLOR: Demand's been great, and probably a little higher than our already lofty expectations when we launched the fund. It just shows the amount of pent-up demand out there in the institutional and retail community for a Bitcoin ETF. We've had positive inflows every day since we've been launched. As you mentioned, we crossed $1 billion US a few days ago, and in Canadian dollars, which is what we track, we're at $1.4 billion as of this morning.
- And what's the demand forecast like right now, especially of course, as we had Coinbase going public yesterday? What are you anticipating throughout 2021?
GREG TAYLOR: Well, we're still seeing a lot of people that really just want exposure to real assets. And really, with all the money printing going on by central banks globally, people are looking at getting money out of the fiat currency system into something else. Gold has traditionally been the source of this money flow, but we're starting to see more demand for crypto assets. And certainly with the move in Bitcoin in the last little bit, that's caught a lot of attention.
And products such as ours with the ETF makes it a lot easier for retail investors and institutions to get exposure to this. So we still think, as long as people are concerned about whether traditional currencies are going to be devalued, or inflation comes back, we're looking at people looking at adding more to cryptocurrency. So we're positive throughout the balance of the year for this asset class.
- You know, usually people like to go to ETFs for a variety of reasons. One, sometimes the stock or asset might be too expensive for them to purchase outright. But it's also a really nice way to mitigate risk. And we already know Bitcoin, cryptocurrencies, are incredibly volatile. So what's that risk mitigation look like if you are to jump in to BTCC?
GREG TAYLOR: Well, the big thing we're looking at with an ETF, and we're following the roadmap of gold, really. Because when the gold ETFs came out over 20 years ago, it really made it so that the average person can buy gold, and you don't have to worry about the storage aspect, and trying to figure out how to transact in gold. And really, this is what we're trying to bring for crypto assets, and why we think we've seen a lot of demand for the Bitcoin ETF.
Because people want to have access to Bitcoin and other crypto assets, but it's usually been hard to do. You have to figure out how to open a wallet. You to figure out if you want hot or cold storage. You have to figure out where your keys are. You have to be worried about, can you actually use the cash? And an ETF makes it a way easier form for people to get access to it. If you want to sell it, you can turn around, and when the market's open, you can hit the bid and sell and it's back in your account. So that takes away a lot of that risk, that it's really quick to get in and out of the asset class.
It's also, we will do the custodian aspect with our counterparties to make sure that there's a trust factor there. So it really makes it so it's easier for people to get access to it. And that's going to bring in more investors to the space. And really, that's the goal that I think is going to happen, is you get more people into the sector, more institutions involved in the sector. And the sector gets bigger, that hopefully will take away some of the volatility that we've seen in the last little bit.
Certainly, it's not going to take away all the volatility, because it's a very volatile asset. It's in the early days of its life. But we do think having more institutions involved should help to minimize some of the volatility.
- So then, to that point, going to BTCC makes things a little bit easier for that exposure to cryptocurrency. Of course, we had Coinbase going public just yesterday, which of course, many folks said was a watershed moment. And now we're going to see a lot more companies getting involved. But also the ease of buying those cryptocurrencies, or trading and selling them, is going to be inevitably become easier. And net fees, over the longer term, are going to start coming down.
Do you view that as a headwind for your ETF? Is it things become easier, folks say, I don't need to go to an ETF. I can actually just hold the asset outright.
GREG TAYLOR: Well that's been the case for a number of years. People could just open a Coinbase account and open a wallet and store it there. But it still makes it harder. It's outside of some of your registered accounts. It's harder to maintain and see with your own asset mix. And an ETF is a nice wrapper that's always going to have a niche in the market, because it's easy to get in and out of. It's lower fees. And it's going to be something that makes it more suitable for the average retail investor to do.
Certainly, institutions that are sophisticated will, over time, probably gravitate to looking at commodities. Much like mining investors have, at times, always had some of their portion directly in physical gold. So there's always going to be one asset class, or investor group, that's going to prefer looking at an ETF versus the physical commodity. But I think the Coinbase IPO, more than anything else, or direct listing, really just shows how the sector has emerged over time, and how it's advanced.
And that was a big thing for these ETFs to get listed. The ecosystem around trading cryptocurrencies has come a long way in a number of years. And the fact that you've got companies like Coinbase that are able to make trading and transacting more seamless than it has in the past, and much more fluid, I think goes a long way to making the sector evolve and become more comfortable for many investors to use.
- All right. I want to ask you about competition. Because right now, at least in North America, you're essentially the only game in town. Do you see that changing any time soon, especially as folks are clamoring to create these ETFs here in the United States?
GREG TAYLOR: Well, certainly, there's a lot of interest in the US, and everyone's waiting to see what the SEC will do, and when they will announce an ETF around Bitcoin. So we're doing everything we can to make sure that our product is as comfortable for investors to use as possible. There's options listed on the ETF right now in the Canadian exchange market. We're doing our best to making sure that we're keeping the bid as spread as tight as possible. And that will trade very close to [INAUDIBLE] within a single basis points of the net asset value of the underlying.
And really, as long as we can deliver a really good experience for investors, we think we'll have a good shot of standing up to competition as the ETFs are listed in other markets.
- I'm looking at Coinbase right now, up about one and a half percent, or one and six-tenths of a percent. At least from that reference price of $250, however, it is about $334 right now. Which of course, is much lower than where it opened yesterday at $381. How much do you consider Coinbase a success? How much do you think that will play into the success of BTCC going forward?
GREG TAYLOR: Well, Coinbase is one of the counterpartners we use in trading BTCC. They've been a wonderful group to work with, and we wish them the best. And really, we're looking at the success of the whole ecosystem is more important than anything else. And I think they would say that too, that they want to make sure that everyone raises their game so that the trading of crypto assets is looked upon as something that's not done in dark alleyways. It's done up in the forefront.
And it's something that more people are going to look at as a core part of their asset mix. We don't recommend anyone has all of their assets in cryptocurrencies. But when you look at the traditional 60-40 portfolio, maybe it's time to actually change that so 5% of those assets are held in real assets, whether it's gold or cryptocurrencies. And it could be a good diversifier as we head into a period that there's a lot of inflation fears or currency risks. So we think as the whole ecosystem evolves and Coinbase goes a long way to help that, this should be good for investors overall.
- All right, Greg Taylor, Purpose Investments' Chief investment Officer. Thanks so much for joining us.
