Canadian crypto market is ahead of everybody else, this fund manager says

Canada is at the forefront of the cryptocurrency revolution and, in stark contrast to China’s approach, it’s our progressive regulatory environment that we have to thank, says Elliot Johnson, chief investment officer of Evolve ETF, which is launching another crypto-based ETF fund to give investors more access to the hot sector.

Bitcoin’s price has been sliding this month, coming off a rally over July and August that saw the coin hit close to the $80,000 mark earlier this summer. Interest in digital currencies has been high over the full year and a half-plus of the pandemic, as investors look to names like bitcoin and Ethereum as alternative places to sock away their money and potentially benefit from rising momentum in the space.

And while access to coins themselves can be had through various crypto-exchanges — Canada has a number of options running from retail investor platform Wealthsimple to fintech companies Mogo and Binance — investors looking for broader access to the space have options as well, including a new ETF to hit the market on Wednesday from ETF company Evolve, which launched Bitcoin ETF (Bitcoin ETF Stock Quote, Charts, News, Analysts, Financials TSX:EBIT) on the Toronto Stock Exchange earlier this year and is now putting out a multi-cryptocurrency ETF under the ticker ETC, said to be the first of its kind in Canada.

“We’ve been working on this product since April when we launched the ether ETF,” said Johnson of Evolve, speaking on BNN Bloomberg on Tuesday. “Back in April, it was an interesting month for the crypto markets. Ether itself was up 50 per cent by the end of the month and bitcoin was down about 4.2 per cent.”

“We had advisors and investors calling us saying, I want to buy the basket, how do I buy a diversified portfolio of cryptos and how do I make sure I have the right exposure to the overall category the overall market? That’s really what [ETC] is all about,” he said.

So far, EBIT has broadly followed the rise and fall in the price of bitcoin over the past eight months since its debut in February. To date, the stock is down about 26 per cent, while the price of bitcoin is down 20 per cent over that span.

Johnson said the ETC fund will hold both EBIT and ETHR, the company’s ether-based ETF, in weightings relative to their respective market caps. 

“Bitcoin and ether together are about 65 per cent of the overall crypto market, so you’re getting really good exposure, and we’re not charging a fee for this new fund because it’s really just a way to help investors get allocation broadly to the crypto market,” he said.

Cryptocurrencies have been in the spotlight recently not just for their soaring valuations but due to China’s decision to crack down on the mining of cryptos and, as of last week, crypto trading as well, moves which have caused companies to shift their businesses offshore.

So far, the latest from China, which held the majority of the world’s mining operations up until earlier this year, hasn’t appeared to have done much damage to bitcoin’s price, with the coin down slightly since last week’s announcement by China’s central bank.

But Johnson says the situation in China effectively highlights the benefits of Canada’s position on cryptocurrencies, where regulators have been more embracing, as evidenced by the number of cryptocurrency related equities available for purchase. 

“The whole premise behind the blockchain is about giving sovereignty over asset ownership to the individual, and it can’t be controlled by a country,” he said. “We are excited to be watching this space because on the one hand you have the news out of China and on the other hand you have El Salvador making Bitcoin legal tender.”

“I think there is room for everybody to participate. China has been unsuccessful in their efforts so far to stop cryptocurrencies when they banned miners back in the beginning of the summer, those miners just shipped their computers to other countries and kept going,” he said. 

Johnson says that difference in regulatory approach has put Canada in the lead as far as cryptocurrency investing goes.

“We’ve never had more conversations outside of Canada than we’ve had since we launched EBIT back in February. The whole world is looking at Canada and I think we should be really proud of what we’ve got here,” Johnson said.

“Our progressive regulator has allowed ETF products to come to market ahead of everybody else, which is what we did with ETFs to begin with — the first ETF was launched in Canada in 1990. Obviously, everybody’s looking to the US and wondering if and when they will get a Bitcoin ETF down there. They have a very different process and different approach, so people are looking at Canada,” he said.

“We are really in the driver’s seat on this trend right now,” Johnson said. “I think it’s something we should really be proud of and the rest of the world will catch up. But in the meantime we’re ahead.”