As Australia creeps towards mainstream bitcoin adoption, Global X’s Marc Jocum cautioned against adding the wide array of meme coins and altcoins in the exchange-traded fund (ETF) space.
Speaking at the Wealth Management Summit on Friday, the senior product and investment strategist said: “We’d obviously like to be at the forefront of innovation, but I still think if you’re talking about starting off with bitcoin adoption, to move to the other types of cryptocurrencies … I think the advisers that we’re having conversations with mainly want to stick to the larger players.”
As Australia’s first ETF provider to offer a bitcoin ETF, the company has since expanded to include an Ethereum product. Now, Global X has observed growing interest in other cryptocurrencies like Ripple and Solana, as well as in diversified cryptocurrency funds.
However, while he sees an application for these within the ETF space, Jocum said there is a limit to what would be worthwhile to pursue.
“There’s over 10,000 cryptocurrencies to invest in, so it’s an absolute supermarket out there. And in my opinion, most of them are garbage,” he said.
Jocum drew a parallel between the cryptocurrency market and the broader sharemarket, suggesting that as cryptocurrency gains wider adoption beyond retail investors, it may evolve to reflect the sharemarket’s characteristic where a small percentage of companies (some 4 to 6 per cent) generate the majority of returns.
“It might be the same in crypto land, and you saw the rise of these [initial coin offerings] ICOs that came out that pretty much went to zero,” Jocum said.
“These meme coins, they might have some application, but I think the majority of wealth management professionals want to stick to the large, big network types of cryptocurrencies.”
Looking back over recent years which have seen a real spike in the adoption of the asset class, Jocum highlighted two pivotal developments that significantly legitimised cryptocurrency: the approval of cryptocurrency ETFs in the US and the ongoing regulatory steps in the US under President Donald Trump.
While Jocum believes it’s only a matter of time before the asset class sees expanded adoption in Australia, he said there’s still a way to go in terms of regulation.
“I’m still yet to see Albanese coming up to say that, you know, Australia wants to be a crypto capital of the Asia-Pacific region,” he said.
At the same time, Jocum commended the growing Australian cryptocurrency ETF market, which has already led to fee compression in the space.
He explained that cryptocurrency ETF fees have traditionally been high due to the nascent nature of the technology and associated costs at the custodial and trading levels, including margin requirements on some platforms. However, growing competition in the market is now driving these fees down.
“I think, like with any new technology, once there becomes more abundance, liquidity begets more liquidity, and things become cheaper over time,” he said.
Speaking alongside Jocum at the Australian Wealth Summit, AMP head of portfolio management Stuart Eliot said AMP Super is open to the idea of using cryptocurrency ETFs to invest in the asset class but needs to tick-off several important compliance checks first.
AMP Super was the first super fund to invest in cryptocurrency, adding bitcoin futures into its dynamic asset allocation program in May last year. The exposure to the asset class has so far generated positive results for the fund.
AMP views cryptocurrency as a positive investment case not just in terms of the increased allocation it’s expected to receive but in terms of developments in areas such as stablecoins and how that might transform the financial system, Eliot said last week.
While the super fund currently trades bitcoin futures in order to invest in the asset class, he added that the fund was “on a path to using an ETF”.
“[However], there’s various things that we need to tick-off on the road to get there,” Eliot said.
From an individual, retail investor perspective, Eliot suggested that ETFs are probably one of the more secure and straightforward methods of getting an exposure to the asset class.
“They’re ASIC-regulated and if you just wanted to invest in a specific coin such as bitcoin, there’s five or six ETFs you can choose from,” he said.
For investors that want something more sophisticated, Eliot said they would be better off using a more specialised custodian service provider.
