Jul 9, 2024

VanEck Australia's Head of Investments & Capital Markets Jamie Hannah joins Markets Daily with the latest update on the launch of spot bitcoin ETFs in Australia.

Video transcript

Things like Terra Luna FTX Blob certainly didn't help things along because the whole industry is tied into that. Um And it's all about perception. So from where we're coming from, it's a step in the right direction for the crypto markets in Australia. It's Tuesday, July 9th and this is Markets Daily, a show where we get into the minds of some of the most experienced and smartest CEO S analysts, strategists, professors, researchers, anyone with a hot or smart take on the crypto markets before we get into today's discussion, let's take a look at what's going on in the news this morning. Now bullish Bitcoin drivers remain in play despite Germany sales and Mount Gox reimbursements that we've been talking about on the show for the past couple of days. According to Ts Lombard, the G7, an informal group of advanced economies is currently experiencing an expansionary phase of business cycles amid elevated interest rates. The indicator gauging the short term economic outlook for groups major nations has crossed over 100 is rising indicating above trend growth and acceleration. This while the US Bureau of Labor Statistics report on the June consumer price index due Thursday is expected to show that the cost of living rose 3.1% over the year. According to a survey of economists by the Wall Street Journal, the expected slowdown would imply continued progress towards the fed's 2% target. Renewed rate cuts could further catalyze demand for risk assets like Bitcoin. And the path of least resistance for Bitcoin is on the higher side as Wall Street remains entrenched in a wave of tech optimism, as evidenced by the new record highs in the ratio between its tech heavy NASDAQ index and the broader S and P 500 T. Lombard said it in a note to clients that signs point to the US equity market not in bubble territory. Now joining the show to unpack what's going on in the market specifically in Australia's Deputy Head of Investments and capital markets at Venne Australia, Jamie Hanna. Hey, Jamie, good morning. How are you? I am doing fantastic this morning. Uh We're here to talk about the markets not looking so fantastic over the past couple of days, but uh given the news this morning, people are still bullish. What are you watching in the markets this morning? Look for us. I mean, we always focus on uh equities in terms of how they perform and, and the underlying bonds in relation to them. It's very difficult to tie that back into the crypto markets. Um The correlations aren't particularly high between them all. Um But it's certainly been a risk on for for most of this year and, and last year. So, you know, until economic conditions change, uh the markets are still pushing ahead quite strongly. Tell me a little bit more about the correlation or lack of correlation between uh Bitcoin and equities specifically in Australia. What are you seeing look, generally speaking, um Most asset classes have some form of correlation. It means that they move, you know, if, if equities in the US go up, you generally find equities around the developed world will go up. Um If gold does a certain thing, you know, how do gold equities move? So there's always generally quite a link between them. But if you actually look at the price of Bitcoin in particular, um it really shows very low correlation over the past 10 years to other asset classes. So in terms of portfolio theory, it actually means that crypto or Bitcoin in particular is actually quite a good diversify to a portfolio because it doesn't go up as the rest of the markets go up and it might not go down when other markets fall. So that type of thing is certainly something you should be looking out for when you're looking at, you know, Bitcoin investment in particular. Um but it does show some, some tie into the US uh tech market. However, you know, there's no long-term trend to that and certainly in the short-term. So I think time will tell um if there's any further correlations going into the future? Well, do you think that the release of the spot Bitcoin ETF S, of course, here in the US. But other places around the world, we're gonna talk about the launch of the Vanex Spot Bitcoin ETF in Australia in just a second, will make Bitcoin more correlated as we move forward. Yeah, look, I mean, that's certainly a good point. If you look at since January at the start of this year, it's certainly been very good for the Bitcoin spot price. So you can't argue that there's some correlation and you're talking like tens of billions of dollars coming into Bitcoin that has to be purchased somewhere on exchange on one of the, the Bitcoin platforms. Um So yeah, there's definitely been upward price pressure applied through the ETF S, but of course, they seem to be fully invested. Now, I don't think you're going to see uh that huge surge which I've seen for the first six months of this year. So I think time will tell. But certainly if there's outflows to any big extent coming out of equities, it might come out of Bitcoin as well and correlations might move higher to equities. All right, let's talk about the spot, Bitcoin ETF in Australia that Venne recently launched on Australia's main exchange. Now, correct me if I'm wrong, but I leave this. I believe this is the first crypto ETF VE has launched in Australia uh why? I mean, I guess I, I could come up with the answer of why now, but talk me through the decision um on releasing this at the Australian market. Yeah, look, I mean, this has been four years in the making. Essentially, this has not been an overnight, we started uh discussions with the local regulator in Australia back in 2021. Um and to be fair, the local regulator actually recognized um crypto as a new asset class back in October of 2021. So we really started the process back then as soon as the local regulator recognized it. Um but Terra Luna FTX, it kind of um paused everything, the, the local exchange here, the, you know, the Australian securities exchange A SX certainly um decided to pause any applications at that time. Um until really the market kind of normalized itself that said there is a secondary market in Australia and they actually allow some launch of a Bitcoin um ETF here but not being the primary exchange, it's been a very long road and it was the SEC in January this year, um which really approved the, the US Bitcoin spot ETF. And as a result of that, we were able to lobby the local exchange here. And over the last six months, we've worked with them. And in June this year, we were able to launch a, a Bitcoin ETF in Australia, which has seen really remarkable flows. I mean, we manage over 42 ETF S in Australia Van um with more than $17 billion worth of assets. But our local V BT C the, the ticker in Australia that ETF has actually been the strongest out of any launch we've had over the previous 10 years. What do you think it is about the launch of the Bitcoin ETF that consistently um is overperforming other ETF assets? I believe it's the most successful ETF launch in history here in the United States. What do you think it is about the launch of this specific ETF that is making it so successful? Look, it's hard to pinpoint any particular reason. But I, I feel like a lot of investors are obviously interested in the asset class. So there's a lot of talk, but a lot of people have been um concerned, I guess about buying through various Bitcoin exchanges. Um There's certainly a lot of stories about people buying in the early days through um I guess non reputable exchanges and losing their money or the people who have lost their, their key and you know, have lost their assets. So that type of thing always plays on people's minds. So if an already existing regulatory uh fund or exchange is offering this, it gives some legitimacy to the underlying asset class and it allows, I guess investors some form of security and I guess safety in knowing that they're essentially applying institutional grade, custody, institutional grade and regulated exchange pricing that they feel more comfortable being able to buy it than if they're buying it themselves through, uh, a, a lot of unregulated exchanges. Talk to me about demand. I believe the product's been on the market for a couple of weeks now. Uh, you're saying it's the one of the most successful, what have inflows been like? Look, inflows have been really strong. Any new product in Australia is very difficult to uh get significant inflows at the start. And, and this one has shown that we've got a quite a strong retail presence immediately. Um There's been a lot of buying through platforms which would otherwise be associated with mum and dad investors. There's certainly been some of the biggest uptakes um at this early stage, what it hasn't seen at the moment is um institutional or uh I guess advice, money coming through financial advisors, but they're obviously um restricted in what they can recommend under local regulations. So it, it's a really work in progress, but the initial uptake has been extraordinarily strong and I presume it will continue and it's, it's certainly um getting a lot of media attention, certainly getting a lot of press. So from that point of view, it's in people's minds at all times over here in the US, we saw asset managers, you know, holding educational seminars for investors about Bitcoin and Bitcoin ETF S and what this is and what it means and how to allocate it in a portfolio. How are you addressing education for Australian investors? Yeah, look, I mean, we're running a lot of webinars. We're doing a lot of media, our website offers a lot of information. So we're out there in, in, in the public eye, really educating um Verne as a whole um from our US entity has a digital assets team who some of the leading, I guess experts in this space, we've had them presenting to Australians. Um So we're really utilizing some of our deep knowledge, our deep history in the crypto space as a firm to really educate locals. Um We get a lot of queries and we're always open to any information that people want or any information or questions they might have. We're really taking the time through our sales team through our education packs to really help people understand as much as they can. Are you getting any questions about other ETF S, you know, uh other crypto ETF S have launched in many different areas around the world? Are investors coming to you and asking, you know, when might there be an E ETF, when might there be a sole ETF? Oh, absolutely, absolutely. At the moment, I mean, it's really just Bitcoin and e if anything in Australia, which would be available, we only have Bitcoin. Um Certainly people are looking at Solana and a few others. Um So, yeah, there's lots of questions around that. Um But at this stage um the regulatory environment really isn't there to open it up to a, to a host of others. Venne itself runs AAA SERIES of um you know, non Bitcoin so on. And some of the other um alt coins out of Europe um as an exchange traded note which people can access. So, Vex as a whole has options available. But in Australia, you know, we're, we're bound by our local regulations and so we have to operate within that framework. And lastly, I wanna talk a little bit about that regulatory process. You said you applied four years ago here in the US. Uh the first spot, Bitcoin ETF application happened 10 years before the approval, maybe talk us through the process of getting this regulated. And if you can do a little compare and contrast to the process in other regions. So in Australia, um once the local regulator which is uh Asic um similar to the SEC gave the approval for the asset class, it really comes down to the exchange as in the Australian securities exchange, doing their due diligence on the product. So they did a considerable deep dive um into the actual product. So they were really um wanted to understand the crypto custody. So who's behind it? In our case, Gemini and, and Coinbase, but primarily Gemini. So they wanted to do a deep dive. So they had meetings with the crypto custodian, they wanted to understand all their regulatory um requires, they wanted to understand their processes, their controls. So they really focused on that area of the custody. Um then within our internal framework, they wanted to understand how we were going to be managing it, what expertise we had, what processes and controls we had in place. Then they look at insurance as the business operating environment. So it's very difficult for a non global firm or a firm without some form of like background in either ETF S or crypto to get anything into the market. Because the, the it was an onerous obligation having launched over 40 ETF S in Australia. Um I can tell you that not once have we ever had such um a deep dive into the product before launch. So comparing it to other jurisdictions, it's been onerous in every jurisdiction. Um No local regulation later, no local exchange has just been completely on board with launching a, a crypto ETF or ETN. It's been a lot of work on everyone's part because within every organization, there's always people who um have AAA dim view or a view that they don't really appreciate crypto assets. And so they'll put roadblocks in place or they'll want extra assurances to ensure that, you know, that nothing can go wrong within the process. So it's been a long process. It's been a long road. As I said, things like Terra Luna FTX block certainly didn't help things along because the whole industry is tied to that. Um and it's all about perception. So from where we're coming from, it's a step in the right direction for the crypto markets in Australia. And I think globally um with the US launch of their spot Bitcoin ETF. And I think from here, assuming um everything continues as it is at the moment that, you know, we could see um you know, further inflows and, and further loosening of the regulatory environment to allow different coins, Jamie. We're gonna have to leave it there. Thank you so much for joining the show. I know you're in Australia. So it's pretty late at night for you right now. Uh We hope you have a good night. It was a pleasure chatting and congratulations on the launch. Thank you very much. Great to chat.

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