Furious success of first Bitcoin fund shows who leads the ETF market

The roaring success of the very first Bitcoin exchange traded fund was no malice to cryptocurrency fans. But if they did not know about ETFs, the venue might have been scary.

The explosive debut of the Target Bitcoin ETF (ticker BTCC), whose trading volume approaches $ 400 million worth of shares in two days, is not happening in the largest ETF market. Nor was it in Europe, where similar exchange-traded products have already earned some $ 6.5 billion in assets, according to data compiled by Bloomberg.

It was actually in Canada – where the stock market is only 8% the size of the US and the assets in ETFs amount to about $ 215 billion – less than the SPDR S&P 500 ETF Trust (SPY) on its own. It does not register much further than the ETF industry, but Canada has quietly built a reputation for this kind of coup.

“Canada has long been at the forefront of ETF product development,” said Ben Johnson, Morningstar Inc. ‘s global director of ETF research, said. “From the listing of the very first ETF until recently the home of the very first psychedelic ETF.”

BTCC launched on the Toronto Stock Exchange on Thursday, the first fund of its kind in North America and the first to carry the ETF label. A day later, Evolve Fund Group’s Bitcoin ETF (EBIT) debuted, but with a less impressive trading volume of about $ 14.5 million worth of shares.

As with many areas of innovation, the definition of deciding who or what the first time in the financial world may come down to, but most agree that the Toronto 35 Index Participation Fund, or TIPs, the first iteration of a modern ETF in 1990. Although it did not enjoy the astronomical growth of the US industry – which began with the introduction of SPY in 1993, Canada’s ETF market regularly introduced products that were not tried anywhere else. .

The reason boils down to a more agile and liberal regulatory environment and a focus on innovation. For example, the Evolve fund was approved less than a month after the application was initially submitted.

“Canada has proven that it has a process that leads to innovation and the systems that make it possible,” said Som Seif, CEO of Purpose Investments.

In the United States, the Securities and Exchange Commission has rejected several applications for a Bitcoin ETF concerns that prices may be manipulated and liquidity is insufficient. This has led investors to plow cash into the Grayscale Bitcoin Trust (GBTC), a riskier and more expensive structure that often trades at huge premiums for the value of its underlying assets.

“Canadian regulators seem much more willing to accept innovation,” said Nate Geraci, president of the ETF Store, a consulting firm.

Read more: The $ 6 trillion ETF revolution started 30 years ago in Toronto

None of this is to say that the ultra-rich, very liquid US market is not innovating. The first of a new ETF format that hides its interest against the front – called active non-transparent funds – which started in April 2020 in the US.

“Canada has been ahead of us in some cases, but there are cases where the US is ahead,” said Ben Slavin, head of ETFs at BNY Mellon Asset Servicing. “I would not necessarily generalize that the US is always behind, but only Bitcoin is a very popular topic and this could be a special case.”

Meanwhile, there are many industry viewers who would argue that Canada is not really the first for the Bitcoin ETF. In Europe, there are several ETPs that behave in exactly the same way, the largest of which have been trading for more than five years. Regulatory differences only lead to a different label.