The price of Bitcoin is up more than 100 per cent this year and has outperformed the price of Gold over a number of years. Larry Lepard explains why he likes both digital and traditional gold as inflation hedges.
Video / NZ Herald
New Zealand investors will be able to get direct exposure to the price of Bitcoin on share trading apps like Sharesies after the United States Securities and Exchange Commission (SEC) approved the listing and trading of exchange traded funds tied to the price of the cryptocurrency.
“We expect most, ifnot all, of the Bitcoin ETFs to be filed by US SEC will be available on Sharesies,” a spokesperson told the Herald.
“This will be through our US execution broker. The usual Sharesies transaction fees will apply.”
Easy Crypto founder Janine Grainger said the SEC’s milestone decision legitimised the cryptocurrency as an investable asset - although, in her view, Bitcoin was always legitimate.
“Fifteen years later, traditional finance wants in on the action,” she said in a LinkedIn post.
“What the approval has done is help to foster consumer trust. In a few minutes, millions have made the jump from, ‘Should I invest in crypto?’ to, ‘Where can I invest with the lowest fees?’”
Cryptocurrency exchange Binance New Zealand’s general manager Ben Rose agreed the lower cost, familiar mechanism for retail investors to buy Bitcoin, added credibility to digital assets and could cause their price to increase.
“Bitcoin ETFs will provide easier access to the crypto market, attracting more investors and liquidity.
“While it is not easy to anticipate the scale of new entrants and market dynamics ... It is useful to note that the introduction of Gold ETFs in 2004 led to seven years of positive price action after that.”
Founder and chief executive of domestic funds provider Kernel, Dean Anderson, was dubious about potential investor demand.
He said Kernel would not look to launch a copycat Bitcoin fund here, because it did not expect major demand for it.
“For now, it hasn’t expanded to be a mass market demand [locally], hence not our focus area or area of strength.
“If they do get off the ground in the US, that will likely satisfy most investors.”
Anderson said New Zealand investors could already gain indirect Bitcoin exposure through Vault Digital Funds’ Vault International Bitcoin Fund, which was listed on the trading app InvestNow.
The fund, issued by FundRock NZ, invested in international Bitcoin ETFs on behalf of investors. It was rated the highest risk level and attracted a 1.75 per cent annual fee, according to its product disclosure document.
The eagerly-awaited approval from the SEC announced on Thursday morning, after an online hack and false approval a day earlier, allowed major investment firms BlackRock, Fidelity, Ark Invest, Invesco and Grayscale, among others, to trade shares in funds holding Bitcoin.
In total, 11 funds were approved for listing and trading on the Nasdaq, New York Stock Exchange Arca and Chicago Board Options Exchange.
The issuers of the ETFs would reportedly charge fees varying from 0.2 per cent to 1.5 per cent.
Eight of them were partnered with US exchange Coinbase, likely to use it for Bitcoin ownership and storage.
The price of Bitcoin barely moved on the day of the announcement and was sitting around to US$46,600 ($74,718) - following a 5 per cent intra-day decline the day prior due to the false approval.
Australian institutional cryptocurrency investment firm Magnet Capital expected BlackRock’s ETF, named iShares Bitcoin Trust, to begin trading from Friday (NZ time).
“This is a watershed moment for Bitcoin as it heralds in the opportunity for simple and easy institutional adoption of this asset,” chief investment officer Benjamin Celermajer said in an emailed note to wholesale investors.
US Treasury Secretary Janet Yellen and US Securities and Exchange Commission chairman Gary Gensler. Photo / Getty Images
There was no sign that the ETF approvals would immediately cause investment managers in New Zealand to offer or recommend Bitcoin to clients.
“Any potential future exposure to bitcoin via an ETF or otherwise would be an entirely discretionary decision made by our investment team, based on the merits of the investment,” a spokesman for Milford Asset Management said.
However, the approvals ended a decade-long battle for the cryptocurrency industry to offer investors exposure to the market spot price of Bitcoin, going up against a regulator that recently took legal action against popular cryptocurrency exchanges Binance and Coinbase.
Chairman Gary Gensler continued to warn investors about the asset in a written statement upon the ETF approvals.
“While we approved the listing and trading of certain spot Bitcoin ETP [exchange traded product] shares today, we did not approve or endorse bitcoin.
“Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
The approval was not entirely agreed upon internally, with SEC commissioner Caroline Crenshaw publicly dissenting the changes that allowed the ETFs, over concern that “spot bitcoin markets are subject to fraud and manipulation”.
“These commission actions are unsound and ahistorical,” she wrote in this statement.
“And worse, they put us on a wayward path that could further sacrifice investor protection.”
Whereas, Commissioner Hester Peirce, an outspoken pro-Bitcoin ETF regulator, applauded the move - and pointed out the unfair process and obstruction the SEC historically applied to Bitcoin ETF applicants.
“You need not be a seasoned securities lawyer to spot the difference in treatment of bitcoin-related ETP [exchange trade product] applications compared to the many other ETP applications that have been routinely filed and approved over the past decade.
“Today marks the end of an unnecessary, but consequential, saga.”
Peirce pointed to the riskier, less efficient means that investors were forced to use to gain exposure to Bitcoin, in the absence of an exchange-traded product.
She suggested other cryptocurrency funds could have an easier road to approval following the latest decision.
Meanwhile, the SEC was working with the Federal Bureau of Investigation (FBI) after its social media X (formerly Twitter) account was hacked this week and a false post announced the approval of the Bitcoin ETFs.
In an emailed statement providing more detail of the hack, an SEC spokesperson said on Thursday the original post was not drafted or created by the agency - killing rumours it was a legitimate post accidentally published one day early.
Madison Reidy is the host of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
