Q&A: Bitcoin Funds Are Expanding. HANetf's Co-CEO Explains Why
By Joseph WilkinsAs bitcoin moves steadily into the mainstream, investors are gaining more ways to access the flagship digital currency in their portfolios.Last week, London-based HANetf, an exchange-traded fund provider, launched the world's first euro-hedged bitcoin exchange-traded commodity, or ETC--noting a shift in demand among its European client base.While bitcoin is a digital currency, it is typically priced in U.S. dollars, raising risk for investors seeking to diversify away from the greenback. As bitcoin becomes more widely held across institutional portfolios, some investors could prefer to avoid additional dollar exposure alongside their existing U.S. equity, debt, gold, and oil holdings.In an interview, HANetf co-Chief Executive and industry veteran Hector McNeil explained the shifting trajectory for cryptocurrency funds.The following has been edited for length and clarity.Q: What are you seeing in the cryptocurrency space as an exchange-traded funds provider?A: The listing of our two currency-hedged exchange-traded commodities is a function of the mainstreaming of cryptocurrencies as an asset class. It is exactly the same journey that gold went on. When we first brought out gold ETCs, nobody invested in gold. I think it was around $329 an ounce back in 2002. People were lining toilets with it; they weren't investing in it. And you couldn't invest in it--you could buy coins and bars, or mining stocks--but that was the only way you could do it. Crypto has gone through exactly that same journey, with the diversification benefits and business case around fiat currencies. So it's a function of that.Q: Why would an investor buy a currency-hedged bitcoin fund?A: Investors buy currency-hedged products for a couple of reasons, mainly to take a currency play--a view on the dollar--or to keep their portfolios consistent in a single currency. This is testament to the maturity and mainstreaming of bitcoin into portfolios, and we're seeing the same opportunities and choices coming to the crypto market that came to other markets.Q: What does the growing variety of crypto products mean for the institutionalization of crypto?A: The institutional market has come a long way. And by definition, the committees will always be the last on an emerging asset class, because ultimately they need to see it become more mainstream. The political will hasn't always been there either. You still see today countries in Europe taking different approaches to crypto, with the U.K. one of the last to the table.Q: What are some of the challenges behind crypto's ETF expansion?A: Where ETFs probably aren't going to be as good is in the more esoteric crypto world, like meme coins. I think that stuff's a bit too Wild West still. So you'll find that ETFs will gobble up the more established and safe-relatively safe-crypto assets. In the same way with equities, you won't find less liquid, very small-cap companies in the mix. I also think the challenge comes with continued broader adoption and persuading sceptical investors, and the ETF wrapper helps with that.Q: How do providers navigate some of those 'Wild West' coins in their products?A: I think the more esoteric coins will need to become more mainstream in terms of utility value. One area that may help is being included in broad crypto indices that could bring flows and trading volumes. But the traditional exchanges like Xetra and LSE have strict inclusion rules, particularly at the clearing house, as to what they will allow. So that will determine access.Write to Joseph Wilkins at [email protected]