FTA: Can anything be packaged up into an ETF/passive?
TM: As mentioned before, ETFs can invest in almost any asset class. This includes the ability to replicate assets such as currencies, or alternatives such as gold without needing to hold the physical asset.
This includes cryptocurrency and is why we are seeing them as an increasingly popular way of investing in this asset class. I use the terms ‘investing’ and ‘asset class’ loosely.
After all, most crypto investors are under age 35 and may not have little investment experience. I read a recent study saying around three-quarters of them have not previously invested in traditional assets and more than ½ don’t have a pension.
Saying that, with a market cap of around £600bn, Bitcoin can no longer be ignored as an outlier. The ability to access cryptocurrencies through a more traditional wrapper, where there is less risk of fraud and risk to the financial system, can only be positive.
As well as making them a mainstream asset class, it will likely introduce the younger crypto investors to more mainstream investments.
The fact an ETF can use leveraging means fund managers can reduce the volatility of cryptocurrency through derivatives. And hopefully will mean we see less examples of people chasing the next crypto that will “go to the moon”.
