Renewable Energy - and Amazing Price Forecasts
Much media coverage around spot Bitcoin ETFs is perhaps not strictly accurate, since most of them are technically ETCs (Exchange Traded Commodities) rather than ETFs (Exchange Traded Funds). This distinction might seem to be pedantic semantics for those who view ETCs as simply a sort or subset of ETFs, but nonetheless, it is significant to see two spot bitcoin ETFs launching this month.
Bitcoin strategy ETFs, investing in bitcoin futures or bitcoin miners, have anyway been around for longer.
In Europe Bitcoin ETPs (Exchange Traded Products) have been around since 2019, but Jacobi Asset Management has just launched the first regulated bitcoin ETF in Europe: The Jacobi Wilshire Bitcoin ETF, ticker BCOIN, on Euronext Amsterdam. It has a very high TER of 1.50%, but is also distinguished by reporting under SFDR 8, and following a rigorous and well documented process to source electricity used to mine the bitcoin from renewable sources.
Zumo works with renewable energy providers and provides renewable energy certificates to prove that the digital asset activity is matched with renewable electricity. The Jacobi website has an extensive list of FAQs discussing the nuances around defining and measuring renewable electricity consumption and carbon accounting, for those interested in a deeper dive. This could be very important for institutional or individual investors who want or need to demonstrate lower carbon footprints, including some pension funds that have set out decarbonization targets.
This product is targeted at professional investors with a minimum investment of USD 100,000, which is also pretty unusual for an ETF.
Cathy Wood’s products are instead popular with retail investors and she has just launched a bitcoin ETF that is rather more conventional plain vanilla product than Jacobi’s. ARKB, the Ark 21 Shares Bitcoin ETF, has an expense ratio of 0.21% pretty close to most bitcoin ETCs charging around 0.25%. In common with most products, it keeps bitcoin in “cold” storage, to mitigate the risk of hacks. It invests 100% in bitcoin, holds no cash, and uses no leverage. It is defined as an indexed commodity ETF, which might for some investors sound so similar to an ETC that the “ETF” label is really splitting hairs.
She recently raised her bitcoin price prediction to USD 3.8 million by 2025, which is about 58 times the current bitcoin price of USD 65,000, and whichever unleveraged spot bitcoin ETF you invest in should make a similar amount if this prediction comes true. Disciples of Cathy Wood’s vision for disruptive technology might get a kick out of investing in her product, but we expect it is unlikely to perform much differently from dozens of other bitcoin ETFs, ETCs and ETPs.
We will of course be monitoring the crypto exchange traded universe and keep an open mind in case some nuanced differences between the three sorts of structures might lead to performance divergences.
It is anyway healthy for the market to offer as many sorts of structures and labels as possible in case certain categories of investors cannot access any one of them. For instance, investors who are not allowed to invest in anything labelled as “commodities” might have to avoid an ETC but could still invest in an ETF or ETP.