Bit of pain before ETFS

AUSTRALIA’S first cryptocurrency exchange-traded funds say they will still list on Thursday despite a bloodbath that has seen millions wiped from bitcoin’s valuation and forced renewed questions about the digital currency’s long-term value.

Bitcoin’s price has plunged more than 50 per cent from its all-time high set in November, falling below $US30,000 ($43,400) for the first time in nearly a year.

However Australia’s first cryptocurrency exchangetraded funds say they are still ready to go public with their offerings, with both Cosmos and 21Shares in a race to list on Cboe Australia – previously known as Chix – giving Australians access to crypto through ETFS for the first time.

Cosmos CEO Dan Annan said price volatility was inherent to bitcoin, and that the current low prices might benefit investors.

“This is a volatile asset class and it is always prudent for investors to understand where their exposure fits within their own asset class allocation,” Mr Annan said.

“The launch of the CosmosPurpose Bitcoin Access ETC on Cboe this Thursday will provide those investors who have a long-term view a good entry point into the market.”

Jonathon Miller, managing director of cryptocurrency exchange Kraken Australia, said the launch of Australia’s first bitcoin ETFS was a significant milestone and a good measure of where bitcoin is in its adoption journey locally.

“We may see more Australians shareholders and conservative, restricted institutions add bitcoin exposure to their portfolio,” he said. “However, we must remember that Australians can already buy bitcoin directly right now. So while this is a positive step for adoption, it isn’t necessarily a watershed moment for accessibility and each layer of abstraction away from the underlying asset can add risk and cost.”

Bitcoin slumped on Tuesday as low as $US29,944 – its lowest figure since July 2021 – while rival crypto asset ethereum fell even more severely, losing 17 per cent of its value since Thursday and dropping in price by about a third this year alone.

The concern now for crypto investors is when the slide will end, according to Simon Peters, market analyst for investment platform etoro.

Ryan Mcmillin, managing director at emerging technology venture capital firm Merkle Tree Capital, said the recent drops were directly linked to mounting fears of a recession in the US.

“There are two scenarios for a turnaround in bitcoin prices,” Mr Mcmillin said. “First, the global macro environment improves, or the US heads in to recession, both of which will take pressure off the interest rate-rising cycle. Or secondly, bitcoin is able to carve out a separate narrative to the ‘risk off’ sell down and institutional investors recognise it shouldn’t be traded like a ‘FAANG’ stock as its fundamentals and its adoption rates are much more compelling.

“The approval and expected launch this week of bitcoin and ether ETFS in Australia are a big step on the way to mass adoption.”