Hey guys, so exciting news for the cryptocurrency world is that the first crypto ETF is coming
to the ASX. Now this isn’t the first ETF of its kind that gives investors access to
the crypto in their portfolios because the US stock market already has the first Bitcoin
linked ETF called "BITO". Nor is it the first Australian crypto ETF because the Chi-X already
has "DIGA", because it's a bitcoin mining ETF. Who comes up with these names. But the
first ASX listing for a cryptocurrency ETF is by Betashares under the ticker "CRYP" C
R Y P and it made its debut on the 4th of November 2021 at a price of $11.25. So does
this deserve all the hype and will it make us all rich? Let’s find out.
Now this is going to be the first of many Crypto ETFs to come on the ASX, and that’s
because the ASIC recently gave the green light for companies like Betashares to provide ETFs
with exposure to Cryptocurrencies. Except that there’s one caveat. and that's that
only Bitcoin and Ethereum meets the strict set of criterias that’s necessary to keep
ASIC happy. And two coins in a fund does not an ETF make. Now ETFs are only useful because
it provides exposure to generally hundreds or even thousands of companies for diversity.
Let's take VTS for example, that’s a Vanguard fund that holds 4000 different US stocks.
So rather than buying an ETF that holds only 2 coins, investors can just go and buy the
coins themselves through a digital exchange and be done with it.
But this new Betashares ETF is different. It’s not so much a fund that buys the actual
coins themselves, but it actually invests in companies that are involved in the cryptocurrency
space. So things like digital exchanges, mining operations, and companies that build the infrastructure
needed for the coins themselves. And because it’s an ETF, it’s share price is not based
on the supply and demand of the shares themselves like regular shares, but it’s tied to the
Bitwise Crypto Industry Innovators 30 Index in the US stock market. So this is actually
an ETF by Bitwise listed on the New York Stock Exchange, so CRYP is going to be the ASX equivalent,
holding pretty much the same US companies.
So what does CRYP actually hold? Well, it doesn’t hold any Bitcoins, or Ethereum for
that matter. It holds the stocks of the top 30 companies that do hold bitcoins. If we
dive into the holdings list, the biggest position is in Galaxy Digital Holdings, which is a
small crypto investment company with less than 300 employees, but it's got the same
market cap as our Qantas, which has more than 20,000 employees. So it's definitely punching
above its weight. Now the second biggest position is no surprise, Coinbase, one of the biggest
US crypto exchanges that makes money with every transaction that its users make. Oh
and it holds four and a half thousand bitcoins as well.
So if we keep looking down the list of company stocks, there's actually some big names in
there. There’s some Nvidia who makes the GPUs that’s used in mining operations, and
likewise AMD as well with their computer processors. We also have Square and Paypal here as well
since they are both payments companies, and most of cryptocurrencies utility is in making
payments and some record-keeping, so those two massive companies also have some skin
in the game.
And crypto’s march to Australia doesn’t just stop there either. The Commonwealth Bank
has also just partnered with the crypto exchange Gemini to make crypto investments directly
possible through the Commbank App. That’s going to be coming in early 2022 and there’s
going to be 10 of the biggest crypto coins available like Bitcoin, Ethereum, Bitcoin
Cash, even Litecoin. So you can see that there is going to be a huge wave of crypto products
coming and with ASIC creating this new Crypto Asset class, it's just opened the floodgates
to more crypto products to market soon.
So now comes the question, should you invest in crypto based ETFs? Now I personally would
never encourage anyone to buy any Bitcoin or Ethereum. But if you do want to buy some,
I think do it with a small amount of money that you can afford to lose. Because even
though crypto can easily return 1000% in just a few weeks. It can just as easily crash 99%
in just a few hours. But buying BetaShare’s new ETF probably won’t go to those extremes,
because it's quite diversified and the holdings are in Company stocks with indirect ties to
crypto rather than directly into the coins themselves. But keep in mind that these ETFs
are being introduced at the time when Bitcoin and the likes are pretty much at the highest
ever prices, so I do feel a higher amount of risk than usual. And also the ETF management
fees for this fund are quite significant as well. They charge around 0.67% of your holdings
value per year. Compare to a very vanilla ASX index fund like Vanguard’s VAS for example,
which only charges 0.1%, so you’ll be paying almost 7 times the fees here when you invest
in a crypto fund. But at the same time, if you compare the performance of the two, it’s
also vastly different, so I guess you do get what you pay for here. Though the caveat here
is that past performance is not a reliable indicator of future performance.
So I guess my final bit of advice here is to heed the saying buy the rumour, sell the
news. And that effect is really strong in the crypto world. Just look at the share price
of bitcoin leading up to the BITO debut, and then the price starts to cool off afterwards.
I guess what I’m saying is, that any crypto is a speculative investment, there is no analysis
that you can undertake like earnings for a company, it doesn’t pay dividends and its
unregulated by governments. So I guess it’s the perfect formula for wild fluctuations.
So invest at your risk, but if you still want to do it, just do it as a small part of any
portfolio for a little bit of exposure to something that could either take over the
world one day or just become completely valueless. So that’s it from me, make sure you hit
that subscribe button for more content like this, and smash that like button as well.
I’m the healthy investor, and as always I’ll see you in the next video.