More delistings of Blockchain ETFs may be coming

The delisting of several crypto-related ETFs in Australia could become a global trend, industry participants said, given that issuers could be forced to drop similar investment products marketed around the market’s recovery.

Cosmos Asset Management sought to delist the Cosmos Purpose Bitcoin Access ETF (CBTC) and the Cosmos Purpose Ethereum Access ETF (CPET) from Cboe Australia.

Trading is set to be suspended pending the outcome of the application.

Launched in May, CBTC and CPET 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 fallen around 25% since inception, while CPET is down 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 that the Australian market is mainly driven by retail investors and investment advisors. Distribution expertise is required to succeed in these channels, he said.

“Therefore, in the case of Cosmos, a new and smaller vendor, it does not surprise me that they were not able to achieve the success required to continue running this product,” Spiteri said. “With many ‘me too’ products out there lacking differentiation, it will be the products that offer value, from the vendors that have the distribution capability and crypto expertise, that will continue to thrive.”

Other Australian crypto ETFs are hanging on

21Shares, which also brought bitcoin and ether ETFs to the Australian market in May, has no plans to remove the funds, a spokesperson told Blockworks. The ETFs launched as a result of a joint venture with Global X and – unlike the Cosmos funds – were the first in the country to provide direct exposure to the two largest crypto assets.

Like Cosmos Asset Management’s fund, the 21Shares vehicles haven’t gained much traction.

The Global X 21Shares Bitcoin ETF (EBTC) and the Global X 21Shares Ethereum ETF (EETH) had roughly $2 million and $1 million respectively in assets as of Wednesday.

The 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 nearly every asset class with crypto facing particular headwinds,” Arthur Krause, director of ETP product at 21Shares’ parent company 21.co, said in an email.

More crypto ETF delistings are imminent, some say

Bitcoin is down nearly 71% since hitting an all-time high last November. Ether, which peaked the same month, is down around 68% over the past 12 months.

Nathan Geraci, president of The ETF Store, said that while he believes spot crypto products that can survive the drawdown have a bright future, he expects issuers to remove a number of crypto-adjacent funds.

“Anytime an asset class experiences the kind of carnage we’ve seen in crypto, there’s going to be some product damage,” 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 in January 2018. The fund has approximately $440 million in assets.

BLOK, which is down about 57% year-to-date, has delivered net outflows of nearly $60 million in 2022, including $30 million in the past month, according to ETF.com.

Many crypto-related products similar to BLOK came to market as the SEC continued to deny spot bitcoin ETFs in the United States, 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 firm 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) — achieved $33 million in 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 in combined inflows during the month.

Overall, digital asset investment products globally saw 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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