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The massive crypto bull runs in the last few years ushered in a new wave of potential Bitcoin investors in Australia. Although thousands piled into the industry, many remained wary onlookers, unwilling to trifle with crypto exchanges and unregulated assets. There was a demand for an alternative – an investment vehicle that could be purchased on the Australian stock market but tracked companies working in the blockchain sphere.
After several years of rejecting applications, crypto-related ETFs were launched. There are now multiple blockchain-centric funds that Aussies can buy from traditional stockbrokers. This guide will explore the various types of Bitcoin and crypto ETFs Australians can buy, the pros and cons of these funds, and a step-by-step guide on how to buy crypto ETFs in Australia.
Quick Guide - How To Buy Crypto ETFs In Australia
- Choose a crypto brokerage platform. The first step is for investors to research Australian stockbrokers and choose which best suits their financial goals. Factors to consider include brokerage fees, user interface, and liquidity.
- Register an account. Once a brokerage platform has been selected, users must create an account. This process is typically a little lengthier than registering for a crypto exchange, as identification and basic personal/financial information must be provided.
- Deposit funds. Most brokerages will accept AUD deposits, although some may convert this into USD before it can be used. The majority of platforms will accept bank transfer deposits, which can take a couple of days to clear.
- Select a crypto ETF to buy. There are now a few Australian-managed ETFs available to investors. Alternatively, certain platforms allow users to hold international portfolios where customers can buy U.S. or European crypto ETFs.
- Buy the ETF. The easiest way to buy an ETF is at market price, which will clear instantly and add the stocks to the brokerage account. More advanced users can set a trigger or limit orders.
What Are Crypto ETFs?
To understand crypto ETFs, we must first dig into what ETFs actually are. Exchange-traded funds (ETFs) are extremely popular investment vehicles that can be purchased from nearly every major brokerage in the world. Unlike buying a stake in a business directly, ETFs track the value of an underlying asset. This often takes the form of an index, where the ETF represents the market cap of a “basket” (multiple) stocks, rather than just one. For example, the ASX200 ETF represents an aggregate valuation of Australia’s top 200 companies. In other cases, an ETF can track the value of a single commodity, like gold or Bitcoin, to help investors avoid difficulties in storing these assets.
Crypto ETFs tend to track the price of an underlying coin (usually Bitcoin or ETH), or a group of companies innovating within the blockchain space. These can be traded on regular stock exchanges, but not on crypto trading platforms or DeFi apps like actual cryptocurrency.
The History of Crypto ETFs In Australia
For some time, acquiring ETFs from the cryptocurrency/blockchain industry was impossible. The Australian Securities and Investment Commission (ASIC), along with other regulatory bodies, consistently denied applications from fund managers throughout the late 2010s. However, European and American stock exchanges began to change tact in 2021, with the Securities and Exchange Commission (SEC) approving the United State’s first-ever Bitcoin ETF, BITO.
The event caused a wave of new approvals across the globe, with Australia eventually joining the fray. The nation’s first ETFs following the price of a specific crypto, EBTC, and EETH, were released by ETF Securities in conjunction with 21Shares in May 2021.
What Is The Best Way To Buy Cryptocurrency ETFs?
There are a couple of different ways to buy crypto ETFs, but by far the most common (and easiest) is by using an online stock broker. Australia is home to 50+ platforms that support buying, selling and trading ETFs on both the ASX and international markets.
Most stockbrokers in Australia are fundamentally similar – offering the convenient purchase and storage of investments that can be accessed via a website or mobile application. Some specialize in micro-investments (purchases under $100) such as Bamboo, while others are linked directly to bank accounts (CBA/Westpac Share Trading).
Where To Buy Crypto ETFs Australia
Given the wealth of options to own crypto in Australia, choosing a platform to buy crypto ETFs can be difficult. The first thing to make sure of is that the broker actually sells the desired assets. Other factors to consider include brokerage fees, services like copy trading or customizable charting, and minimum investments.
Some of Australia’s most popular stock brokers that offer crypto ETFs include:
- Westpac Online Investing
- CMC Markets
What Types of Crypto ETFs Can Be Bought In Australia?
There are three main types of crypto ETFs for potential investors to consider.
1. Spot ETFs
Spot ETFs are the simplest form of ETF accessible to Australians. These funds usually just track the price of their underlying asset, plus a premium. For example, a spot Bitcoin ETF would generally follow the price movements of BTC, with a 5-10% premium attached for convenience.
Spot ETFs in the crypto sector usually only track the price of one underlying asset, rather than multiple. However, as the intersection between traditional and decentralized finance evolves, it’s likely that spot ETFs reflecting an index of the top five (or more) cryptocurrencies will pop up.
This type of fund is nearly always backed by a physical reserve – so, at the time of writing, $1,500 invested into a spot Bitcoin ETF would be similar to buying 0.1 BTC. In that sense, investors are essentially paying an intermediary to store their digital currencies in a cold wallet on their behalf. This is almost identical to storing crypto on a cryptocurrency exchange (such as Swyftx and CoinSpot). However, investing in an ETF comes without some of the risks, as there are much stricter regulations and laws for fund managers to abide by.
2. Futures ETFs
Futures ETFs are a slightly different form of exchange-traded fund that isn’t backed by underlying assets. Rather, they are managed by a company that is actively exchanging various futures contracts. Although their methods are fundamentally different, futures ETFs will essentially try to mimic the actual price of an asset – much like spot ETFs. For example, an investor that purchased a Bitcoin futures ETF would actually be investing in derivative contracts based on BTC’s price action.
3. Blockchain Company ETFs
The final option for Australian investors interested in ETFs is indices that track industry innovators. Also known as “pick and shovel” investing, these funds provide exposure to a range of companies in the blockchain industry, rather than the price of an actual coin. The ETF might instead comprise mining corporations, fintech startups, or blockchain-as-a-service businesses.
Interest in these businesses usually ebbs and flows similarly to the overall digital currency market, so large downturns (or rises) will likely be mirrored in the price action of these ETFs. That said, blockchain companies and individual cryptocurrencies aren’t always correlated, making these ETFs a solid way for bullish investors to diversify their portfolios.
Best Crypto ETFs In Australia
There are only a select few cryptocurrency ETFs available to Australians. The limitations investors will encounter are caused by several different factors. For starters, acquiring approval and meeting all the regulatory requirements for publicizing and managing a stock market fund is difficult and time-consuming. The rather harsh crypto winter of 2022 has also wreaked havoc, causing several ETFs to be sold and delisted from Australian stock brokerages as investor interest has cooled off. With that in mind, there are still a couple of viable options available to Oceanian residents.
BetaShares are one of Australia’s most popular fund managers, providing ETFs in a wide range of financial and geographical sectors. Their first entry into the crypto industry, CRYP, was released on the 4th of November 2021. This particular fund tracks various innovators within the blockchain industry, focusing on companies that are building mining equipment and providing key services to the industry.
Companies tracked in the ETF include:
- MicroStrategy INC
- Riot Blockchain
The 21Shares Bitcoin and Ethereum ETFs are spot funds that track the underlying price of the respective cryptocurrencies. It was one of the first publicly-traded stocks to provide Australians direct exposure to the price action of BTC and ETH, having been released in May 2022. Each share in these ETFs represents a fraction of the price of its corresponding coin. For example, if Ethereum was trading at $1,800, one EETH share would be worth around $1.80.
3iQ CoinShares’ spot price ETFs were released to Australians in the middle of 2022. They are referred to as “feeder funds” as they are providing exposure to assets originally listed on the Toronto Stock Exchange. 3iQ has invested in long-term holdings of BTC and ETH, although the pricing structure of this security isn’t as direct as other spot ETFs. Generally, the BT3Q and ET3Q ETFs struggle with volume and liquidity, which can make them a little harder to buy and sell at market price.
Can You Buy International Crypto ETFs In Australia?
Australians may not be satisfied with the number of crypto-based ETFs available on local stock exchanges. Luckily, there are many international substitutes accessible online. To trade international securities, investors will need to source brokerages that offer this specific service. Trading ETFs from overseas markets can be a little more expensive, as using AUD tends to incur foreign exchange fees.
Potential international crypto ETFs include:
- ProShares Bitcoin Strategy ETF
- Grayscale Bitcoin Trust
- Global X Blockchain ETF
- VanEck Bitcoin Strategy ETF
How To Buy Cryptocurrency ETFs Australia: Full Guide
Step 1 : Choose a crypto EFT broker
The first step is to compare and select a brokerage firm within Australia that offers cryptocurrency ETFs. For this tutorial, we will walk you through investing in a crypto ETF using SelfWealth. However, there are several alternative Australian brokers that may be better suited to your specific financial goals. It is vital to research each platform thoroughly before deciding which to use for buying crypto ETFs.
What's the difference? Brokers vs crypto exchanges: which should you use?
Step 2: Register an account
Registering an account with a stock broker can be a little complex and time-consuming. New customers will need access to identity documents, as well as basic residential and financial information. In that sense, it is quite similar to opening an account on a cryptocurrency exchange like CoinSpot or Binance.
To get started, head over to SelfWealth’s website and select “Create a new account”. Input an email address, password, then verify the email provided to unlock the account.
Before customers can start trading on the newly-minted account, they must pass an application. The exact process will vary from broker to broker but should be relatively similar. On SelfWealth, new accounts need to provide:
- Personal details (such as an address, mobile number, etc.)
- Those with pre-existing share portfolios will need to input their unique Holder Identification Number (HIN)
- Bank account details (for withdrawals)
- Identity document
Once the application is complete, it may take a little while for the account to be verified. New customers will receive an email confirming they can begin trading once the process is finalized.
Step 3: Deposit funds
Certain stockbrokers will accept instant deposit methods such as debit/credit card payments. However, in most cases, funding a share trading account is a little more convoluted than when using a crypto exchange. Customers will typically have to transfer AUD to their stockbroker’s bank account and wait for 24-48hrs for the transaction to clear.
To deposit AUD on SelfWealth for the first time, investors must navigate to the “Deposit Cash” tab on the left-hand pane of the website. From here, a box will pop up containing the trading account’s bank details, including a BSB and Account Number. Customers are also provided with BPAY details if they prefer to use that transfer method.
Send the AUD to be invested to the trading account’s bank details, as you would send funds to any other bank account. For most investment platforms (like SelfWealth), first-time investments into a stock holding must be at least $500, so be sure to transfer enough money.
Step 4: Choose a crypto ETF to buy
If investors have already decided which crypto ETF they wish to buy, its investment page can be easily found by typing in its name or ticker into the platform’s search bar.
For those yet to make up their mind, browsing the broker can be a great way to learn more about potential investment opportunities. For example, SelfWealth provides information regarding market depth, trading volume, recent performance, and any relevant news.
Step 5: Buy the Crypto ETF
Once the bank transfer has been processed and the funds have hit the trading account, it’s time to invest in the desired crypto ETF. There are a few ways to do this on SelfWealth, but the easiest is to head over to the ETF’s page (like in Step 3) and click the green “Buy” button.
This will bring up the order screen, where investors can decide how much of the ETF they wish to buy, the order type, and the expiry type. Novice investors will likely stick to “market” orders, whereas more experienced traders might want to use limit orders to optimize their average purchase price.
Once the order form has been filled, simply select “Review Order” and confirm the submitted details are correct. That’s all there is to it – market orders will usually be filled almost immediately and added to the platform’s portfolio. Limit orders may take a while to execute but investors will receive an email when the order has been fulfilled.
Why Invest In Crypto ETFs Instead of Digital Currencies?
There are several reasons an investor may consider buying a crypto ETF from the stock market rather than holding the coins themselves.
Tighter regulations and lower risk of hacks
Most ETFs are purchased and managed by the ASX (or CBOE), which is a highly regulated and reputable marketplace. There are many protections in place for investors in the Australian stock market, much like when storing funds in a bank account. Liquidation risks, as the industry saw with FTX, are extremely unlikely to occur when investing in ETFs. This is because stock ownership in Australia is a bit like storing crypto in a non-custodial wallet – investors usually own their assets directly.
A broker going bust would be an inconvenience but have a minimal financial impact on the crypto ETF holder. In addition, owning digital currencies through an ETF proxy ensures that the risk of hack is almost zero, as no coins are actually held on the brokerage platform.
Learning how to navigate a crypto exchange has become more and more streamlined over the past few years, but it can still be a bridge too far for the uninitiated. Many investors will feel more comfortable using a stockbroker (online or physical) to gain exposure to the crypto sector.
On top of this, the contagion of 2022 caused many to become wary about storing their coins on centralized platforms. However the alternative – using non-custodial wallets – can be very intimidating for newcomers. If one were to misplace their private keys and wallet seed phrase, there may be a little course of action for reclaiming the lost cryptocurrency. By investing in a spot ETF that tracks the price of Bitcoin or Ethereum, investors are essentially paying a premium for someone else to worry about the best way to store BTC/ETH.
There are many investors that are bullish on the future of blockchain technology while being skeptical about actually buying digital coins. Crypto ETFs provide a middle-ground where traders can diversify into the industry without needing to navigate crypto markets or hold specific coins. For example, the BetaShares Crypto Innovators ETF is weighted toward tech companies doing cool things with blockchain, rather than crypto-only businesses (such as GPU producers NVIDIA). Therefore, the asset will grant some exposure to the ups and downs of the crypto market, while avoiding the wild overnight swings it’s associated with.
Pros and Cons of Buying Crypto ETFs In Australia
- Tightly regulated markets with consumer protection
- Investors can buy into a “basket” of assets, mitigating risk and exposure to the performance of just one coin/company
- Less counterparty risk than using centralized crypto exchanges
- No need to mess around with wallets, seed phrases or private keys – crypto ETFs provide exposure to the big cryptocurrencies without the hassle
- Can be an easy way to diversify a portfolio into the blockchain tech sector without buying and storing coins
- Very limited options available, particularly on the Australian Stock Exchange (ASX)
- Investors pay a premium on the price of BTC/ETH compared to buying coins outright
- Stock brokers typically charge higher brokerage fees than crypto exchanges
- The minimum investment for most first-time ETF purchases is AUD$500, compared to less than $1 on most crypto markets
- Investors must purchase full units of stocks, rather than being able to buy fractional amounts of a cryptocurrency
- The same risks of volatility apply to any crypto ETFs tracking the spot price of BTC/ETH
Frequently Asked Questions
Yes, investing in crypto and ETFs is legal in Australia. There are several crypto ETFs that can be purchased using local or international stock brokers. Examples include securities that track the price of an underlying cryptocurrency or funds that comprise various companies working in the blockchain sector.
Yes, there are quite a few exchange-traded funds that follow the price of an underlying coin – usually Bitcoin (BTC) or Ethereum (ETH). Such securities are usually backed by a physical reserve, meaning the company issuing the ETF holds a proportionate amount of an asset in a hardware wallet.
Yes, there are several crypto index funds available across international share markets. While there are no Australia-based options, investors can consider assets like the Nasdaq Crypto Index (NCI) which provides exposure to eleven of the biggest market-cap digital currencies.
No, as of December 2022, Vanguard does not offer a crypto-based ETF or any other digital currency-related asset. However, the management team is always reviewing their offerings and there is potential for a Vanguard-managed crypto ETF in the future.
Crypto ETFs have only been around in Australia since late 2021, although the idea had been floating around for many years before then. This intersection between digital currencies and traditional finance got off to a rocky start, as the crypto market plunged into a major downturn almost immediately after the first crypto ETFs were released. Over the next 12 months, several of these securities were delisted from the ASX, while others suffered from low liquidity.
However, there is a lot of merit behind crypto ETFs, especially following the collapses of FTX and Terra in 2022. Being able to expose investors to cryptocurrency in a well-regulated, safe manner, might just be the shot in the arm the industry needs. Alternatively, Australians can simply invest in Bitcoin with their funds and hold for the long term.