jeanpast

If one, it would be BTC. In a meltdown, correlations go to 1, and credit issues often emerge. BTC is the most decentralized, censorship-resistant digital asset. In the digital asset trilemma of scale, decentralization, and security, BTC delivers strongly on security and decentralization, but less so on the scale. This trade-off helps in a meltdown and is why they call it Digital Gold.

This is for informational purposes only and does not constitute, either explicitly or implicitly, any provision of investment advice

I think a lot of it comes down to usability. We are increasingly seeing ETH being used not only as an investment, but as a necessary coin to use when interacting with Web3 technologies such as decentralized exchanges, non-fungible tokens, and more. Once Ethereum pivots to proof-of-stake, we could see an increasing number of traditional enterprises pursuing their own initiatives on Ethereum (without fear of being anti-ESG) where they can provide and extract the most value. Another thing to note is that, in our view, investors like to reside where the technological breakthroughs happen. We have seen a lot of chains mimic, or fork existing Ethereum technological breakthroughs. Ethereum by large has the most active, independent developers which are not sponsored by official foundations. They are coming in and developing at their own free-will. This is a major catalyst in our view as it shows organic adoption of the network beyond purely price speculation, and development spurred by grants from official foundations.

When it comes to post-merge, an interesting concept to think about is the lack of daily selling pressure from miners which may not have the network’s best interest at heart. Post-merge, this daily sell pressure subsides (assuming miners sell daily to pay for operational expenses). Miners make around ~14,000 ETH per day (~$20mm per day in USD), give or take, which are typically sold on the market. Another concept to think about is simple supply and demand economics post-merge. Inflation rate of ETH could decline quite substantially, depending on network activity. Presuming demand stays the same or increases, the laws of economics state that prices go higher. We’ve highlighted several potential impacts on ETH in a research piece here: https://3iq.ca/digital-asset-bulletin-issue-13-the-merge/

Some downsides with holding ETFs can include:

• Not having custody of the coins means you can’t send crypto to a friend directly, or use dApps with your crypto
• You can’t use ETF units to purchase anything
• You lose custody of your cryptoassets and rely on a regulated fund manager to store them for you
• The trading hours of the ETF are not 24/7, and trade on stock market hours
• Price spreads and volume can be worse on funds/ETFs than in spot markets

Overall, there are definitely positives and negatives with holding crypto ETFs. The biggest positives we see are: brokerage account integration, the ability to hold crypto exposure tax-free or in registered retirement accounts, and the ability to pursue legal action (against us) if something goes wrong. As we have seen in recent events with CeFi lending platforms, not all companies are subject to the same degree of regulatory oversight like we as fund managers are.

Generally, new exchange listings can positively impact trading volumes as the distribution of the ETF is increased. For some fund structures, like closed-end funds (not ETFs), premiums and discounts can also be impacted. However, both ETFs and closed-end funds have redemption mechanisms in Canada, unlike some products in the USA.

Canadian ETFs, such as those 3iQ offers, have monthly and annual redemptions. Grayscale products are OTC and offer no redemption mechanisms, meaning flows out of the fund have to be sold on secondary markets (OTC exchange) to other investors rather than through the primary market (fund manager) which sells the real crypto. This is how some funds can trade at drastic premiums and discounts on the stock market compared to their Net Asset Value. Management Fees are also generally more advantageous on the Canadian ETFs.