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Here’s what you need to know about Australia's first Bitcoin ETF

Here’s what you need to know about Australia's first Bitcoin ETF

20 Apr, 2022 - 3 min read

Australia’s first Bitcoin exchange-traded fund (ETF) is set to become available for investors from late April 2022.

Sydney-based investment company Cosmos Asset Management has effectively been given the green light to list its Bitcoin ETF on equities trading platform Cboe as early as 27 April, according to The Australian Financial Review.

Instead of investing directly in Bitcoin, the Cosmos product will invest in shares of the Purpose Bitcoin ETF. Purpose Bitcoin ETF listed on the Toronto Stock Exchange more than 12 months ago.

Launched by Canadian firm Purpose Investments, the Purpose Bitcoin ETF was the world’s first Bitcoin ETF, and currently has C$1.57 billion in assets under management.

ASX Clear - the body responsible for clearing equity transactions in Australia - has secured four market participants that are willing to cover the initial 42 per cent margin required for trading commence.

The AFR also noted that Hamish Treleaven, chief risk officer at the ASX, will notify market participants on Wednesday, which means Cosmos’ new product will be able to start trading in seven days’ time.

This will be one of the first tests of real demand for cryptocurrencies. For first-time crypto traders, an ETF may feel like a more accessible entry point. In fact, the AFR suggests there is speculation $1 billion will flow into this first Bitcoin ETF.

Of course this does raise the question as to why investors should consider a crypto ETF rather than just purchasing currency through an exchange.

Why invest in a Bitcoin ETF?

ETFs are considered one of the easier ways to start investing. And for those who have been thinking about dipping a toe into the crypto pool, this could offer a less intimidating starting point.

Before making the decision to invest in a Bitcoin ETF as opposed to investing in Bitcoin itself, there are a number of advantages and disadvantages that are worth considering.

Bitcoin ETFs provide retail investors with an easy and secure way to participate in a Bitcoin-based investment, without having to become an expert. ETFs are investments that trade as a regular stock would. In this instance, a Bitcoin ETF tracks the price of Bitcoin. When the price goes up, so does a share in the ETF.

As such a Bitcoin ETF allows investors to get exposure to Bitcoin, without buying the actual coin - thus working around some of the pitfalls you may experience when buying actual coin. Bitcoin ETF investors avoid having to sign up for a cryptocurrency exchange and won’t directly take on the risks of owning Bitcoin – such as losing the password to their Bitcoin wallet.

Additionally, some Bitcoin ETFs may provide a level of diversification that purely investing in coin doesn’t. A Bitcoin ETF could include Bitcoin as well as stocks in other companies and therefore may feel like a safer investment.

On the flip side, however, it’s important to consider the cost of ETF management fees, which can add up over time depending on the amount of shares owned.

There are also limitations to Bitcoin ETFs, such as not having the ability to trade for other cryptocurrencies.

To learn more about cryptocurrency and how it works, visit RateCity’s cryptocurrency hub.

Disclaimer

This article is over two years old, last updated on April 20, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent cryptocurrency articles.

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Georgia Brown

Personal Finance Editor

Georgia Brown was a Personal Finance Editor and journalist for RateCity, covering the scope of finance in Australia over loans, credit, mortgage and housing, superannuation, and sustainable finance, to name a few. Before venturing into personal finance, she worked as a reporter for Smart Property Investment, Real Estate Business, and REA's realestate.com.au, and these days her work can be seen across numerous publications, including Lifehacker and RateCity.