U.S. issuers of ETFs are still waiting for regulators to approve ETFs related to bitcoin and other digital currencies, but that concept is getting off the ground in other countries.
Huobi, one of the world’s largest cryptocurrency exchanges, launched an ETF last Friday. The Huobi 10 ETF is based on the company’s recently launched Huobi 10 Index, which “tracks the exchange’s 10 top-traded digital assets against Tether (USDT) in real time, using a weighted average calculation method,” according to CoinTelegraph.
“The digital assets are classified into four categories: Coins, Platforms, Applications and Utility Asset tokens. The number of constituents selected in these four categories depends on their transaction volume of last quarter….average daily trading volume in the previous quarter is [then]used to decide the weight of the constituent in the index,” said Huobi in a statement issued in late May.
The Future Of Bitcoin ETFs
Figuring out when U.S. regulators will finally give the nod to bitcoin-related ETFs is another matter altogether. Bitcoin futures debuted on the Cboe in December, followed by a launch on the CME. Nasdaq Inc. is still considering entering the bitcoin futures competition. Previously, market observers and industry experts expected the debut of bitcoin futures to facilitate the launch of bitcoin ETFs, but that has not been the case.
Derivatives help increase liquidity and improve markets for an asset category by allowing investors to bet on ups and downs of an asset, evening allowing individuals to adopt market-neutral strategies. They are also a key component in the creation of many futures-backed ETFs utilized by a range of investors.