More Delistings of Blockchain ETFs Could be Coming
So-called blockchain ETFs in the US are under threat, industry watchers say, as the drawdown highlights oversaturation in the segment
Blockworks exclusive art by axel rangel
The delisting of several crypto-related ETFs in Australia could become a global trend, industry participants said, considering issuers may be forced to ditch similar investment products marketed around the market’s upswing.
Cosmos Asset Management filed Wednesday to delist the Cosmos Purpose Bitcoin Access ETF (CBTC) and Cosmos Purpose Ethereum Access ETF (CPET) from Cboe Australia.
Trading is set to be halted pending the outcome of the application.
CBTC and CPET, which launched in May, invest in crypto through Purpose Investments’ Bitcoin ETF (BTCC) and Ether ETF (ETHH) — spot funds that debuted on Canada’s Toronto Stock Exchange last year. Both Cosmos funds had less than $1 million in assets.
CBTC has dropped about 25% since inception, while CPET has decreased 9.5%.
Cosmos CEO Dan Annan told Bloomberg in a statement that the firm strongly believes in the asset class and is “disappointed with this result.”
Annan did not immediately return a request for comment.
Frank Spiteri, head of asset management at CoinShares, told Blockworks the Australian market is mainly driven by retail investors and investment advisers. Distribution expertise is required to be successful in these channels, he said.
“Therefore, in the case of Cosmos, a new and smaller provider, it doesn’t surprise me that they were unable to achieve the success required to continue running this product,” Spiteri said. “With many ‘me too’ products out there that lack differentiation, it will be the products that offer value, from the providers that have the distribution capabilities and the crypto expertise, that will continue to thrive.”
Other Australia crypto ETFs hanging on
21Shares, which also brought bitcoin and ether ETFs to the Australian market in May, do not have plans to delist the funds, a spokesperson told Blockworks. The ETFs launched as the result of a joint venture with Global X and — unlike the Cosmos funds — were the first in the country to offer direct exposure to the two largest cryptoassets.
Similar to Cosmos Asset Management’s funds, the 21Shares vehicles have failed to gain much traction.
The Global X 21Shares Bitcoin ETF (EBTC) and the Global X 21Shares Ethereum ETF (EETH) had roughly $2 million and $1 million of assets, respectively, as of Wednesday.
Average daily trading volume (ADTV) for the bitcoin ETF has been $56,300 since inception, according to the firm, while the ether ETF’s ADTV is $37,800.
“This year has been a difficult market cycle across almost every asset class with crypto facing particular headwinds,” said Arthur Krause, director of ETP product at 21Shares parent company 21.co, in an email.
More crypto ETF delistings imminent, some say
Bitcoin is down nearly 71% since reaching its all-time high last November. Ether, which peaked the same month, is down about 68% over the last 12 months.
Nathan Geraci, president of The ETF Store, said that while he thinks spot crypto products that can survive the drawdown have a bright future, he expects issuers to delist a number of crypto-adjacent funds.
“Any time an asset class experiences the type of carnage we’ve seen in crypto, there will be some product casualties,” Geraci told Blockworks. “The real area to watch is US-listed ‘blockchain’ ETFs — a segment of the market that is completely oversaturated with products and doesn’t have nearly enough investor demand.”
The largest blockchain ETF is Amplify ETFs’ Transformational Data Sharing ETF (BLOK), which hit the US market in January 2018. The fund has roughly $440 million of assets.
BLOK, which is down about 57% year-to-date, has posted net outflows of nearly $60 million in 2022, including $30 million over the past month, according to ETF.com.
Many crypto-related products similar to BLOK hit the market as the SEC continued denying spot bitcoin ETFs in the US, Geraci said. But even blockchain funds launched by asset management giants BlackRock, Fidelity Investments and Charles Schwab earlier this year have less than $40 million in combined assets.
“Most of the existing crypto-related equity ETFs have very similar holdings and are highly correlated,” Geraci said. “I expect to see a number of these products close over the next year, regardless of whether the crypto market as a whole turns around.”
Lara Crigger, editor-in-chief of data company VettaFi, agreed that a number of crypto ETFs will close, citing declining advisor interest and lackluster flows.
The largest bitcoin futures ETF — the ProShares Bitcoin Strategy ETF (BITO) — notched $33 million of net inflows in October, according to VettaFi data. And other similar funds overseen by Simplify Asset Management, Valkyrie Investments, VanEck and Hashdex recorded just $10 million of combined inflows during the month.
Overall, digital asset investment products globally notched minor inflows of $6 million last week, according to CoinShares, continuing a seven-week run of what the company called “apathy” from investors.
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