Written by Tyler
On July 23, according to official information from the SEC, it has officially approved the S-1 applications of multiple ETF issuers, and the Ethereum spot ETF has been officially approved for listing and trading. Initial trading is expected to begin tomorrow (Tuesday morning US time, tomorrow night Beijing time).
Imagine if any ordinary investor could complete the investment and trading process of crypto asset ETFs in one stop through simple forms of NFT minting or token swapping on the chain. Wouldn’t it be great?
This is what Haya is doing.
As we all know, since October 2023, the spot Bitcoin ETF has become one of the core narratives that prompted the current market rebound. Especially on July 23, the U.S. Securities and Exchange Commission (SEC) officially allowed the Ethereum spot ETF to be listed and traded. Market sentiment It was rekindled, and the secondary market was ablaze. But very realistically, crypto ETFs have discouraged many ordinary investors who are interested in gaining exposure to crypto assets - high entry barriers, high handling fees, complex transaction processes, and even currently only Bitcoin and Ethereum The two mainstream options cannot cover broader and more Alpha growth targets.
But variables quietly emerged in this embarrassing situation. Haya keenly captured this incremental market demand and is committed to creating a more friendly, convenient and low-threshold on-chain crypto ETF investment environment for ordinary investors, so that more ordinary investors can participate in the investment of crypto assets and share the dividends of market development.
The crypto ETF investment boom is just around the corner
First of all, we need to understand that as an "open-end fund that tracks market indices and can be freely traded on stock exchanges", users of ETFs do not need to know too much about specific assets. Instead, they rely more on an understanding of the development trend of the track, and thus directly achieve a portfolio allocation of the entire industry or market through a package of assets.
That is, ETFs not only enable users to gain profits from single stock transactions, but also allow them to obtain returns from a basket of concept stocks, thereby achieving the so-called "fuzzy correctness" - obtaining industry net growth returns close to Beta and sharing the growth dividends of the overall crypto market.
However, at present, whether in the United States or Hong Kong, China, the influential ETFs that have been launched in the crypto world are all centered around Bitcoin and Ethereum, and there are no index-type crypto ETFs yet.
SoSoValue statistics show that as of July 22, 2024, the total net asset value of 11 US Bitcoin ETFs exceeded US$60 billion, of which the ETF net asset ratio (market value as a percentage of the total market value of Bitcoin) reached 4.61%, and the historical cumulative net inflow has exceeded US$17 billion, setting a new historical high.
At the same time, the total asset management scale of the six Hong Kong virtual asset spot ETFs exceeded US$350 million, among which the Bitcoin spot ETF held a total of nearly 5,000 BTC with a total net asset of US$317 million; the Ethereum spot ETF held a total of nearly 13,000 ETH with a total net asset of US$44 million.
Judging from the speed of development, the size of the US Bitcoin spot ETF, which exceeds US$60 billion, can be described as a "lightning achievement" achieved in the past six months or so. It also fully demonstrates the absolute enthusiasm of the market, especially the incremental over-the-counter users, for encrypted assets. As the most eye-catching emerging asset class, cryptocurrencies represented by Bitcoin have long made hundreds of millions of traditional investment users and deposited funds eager to try.
But as mentioned above, although traditional crypto ETFs are a "timely rain", they are not enough. Their high entry threshold, high handling fees, complex transaction processes and other problems still make many people interested in gaining exposure to crypto assets. Ordinary investors in the market are discouraged, and at the same time they are unable to cover broader and more Alpha growth targets such as BNB, SOL, and TON.
In the current context where the categories and quantities of on-chain crypto assets are already extremely rich, whether it is mapping the logic of traditional financial development or considering the actual crypto investment needs, the allocation of crypto investment portfolios in the form of on-chain ETFs for different asset categories and different track directions has begun to become increasingly important and necessary.
Haya, which positions itself as a "decentralized crypto bank for digital residents", is also targeting this field and is committed to providing crypto investment products in the form of ETFs on the chain, thereby simplifying the threshold for investors to enter the crypto market and helping users easily share the long-term, stable and efficient growth dividends of the crypto market.
Haya’s H20: The first index-based on-chain ETF product
The H20 currently launched by Haya is also the first index-based on-chain ETF product. It is supported by a basket of crypto assets (20 constituent tokens) and can be subscribed and redeemed at any time. Users can track the performance of high-quality tokens in specific areas of the blockchain through subscription, trading, and redemption of ETF products to achieve diversified investment goals.
The selection of the 20 constituent tokens that make up the index ETF also follows a rigorous screening process:
The 20 constituent tokens were selected based on their circulating market capitalization and 90-day cumulative trading volume to ensure that the most important and most actively traded assets in the market are represented;
At the same time, the specific weight is determined by the market value and adjusted according to factors such as circulating supply and trading volume. The weight of a single component token is capped at 25% to prevent excessive concentration.
Additionally, the index is rebalanced quarterly to reflect changes in market conditions and ensure that it remains representative of the current cryptocurrency landscape, with the list of constituents and their weightings also adjusted based on the latest data;
Therefore, as of now, the first batch of 20 constituent tokens are shown in the figure below, including BTC, ETH, BNB, SOL, DOGE, TON, ADA, SHIB, AVAX, TRX, DOT, LINK, NEAR, MATIC, LTC, UNI, RNDR, APT, FIL, and ARB.
Bitcoin and Ethereum each account for 25%, totaling half of the weight, ensuring that the index can have its Beta as a ballast while also sharing the Alpha dividends of the other 18 stocks.
Judging from the historical backtesting data, the overall net value of H20 is perfectly consistent with the overall cyclical trend of the crypto industry. It is not only much higher than the overall performance of the S&P 500 in the US stock market during the same period, but also better than the performance of holding only BTC.
It is worth noting that the base date of the index is May 19, 2024, with a basis point of 100, and the latest net value as of July 21 is 105.23, with a return of more than 5% in just two months.
H20 Bonus Participation Form
Currently, H20 is the first index-based on-chain ETF product launched by Haya. In the future, Haya will also launch multiple crypto-concept ETFs based on the weights of high-quality assets in different fields. Currently, Haya has reached a cooperation with Enlighten Tech, a Singapore ETF service agency, which is responsible for the global compliance issuance of crypto ETFs. Enlighten Tech is working with Malaysian financial institutions to apply for compliant ETF products. In addition, the markets being promoted include other Southeast Asian countries, the Middle East, Brazil, Europe, North America, etc.
In addition, H20 will become a key part of the pan-Haya ecosystem (index fund H20, stablecoin HAI, DeFi platform Haya) in the future. The functions of H20 include but are not limited to: being an over-collateralized asset issued by HAI, participating in liquidity mining LP to obtain income, transaction fees/liquidation fees and other fee rights, etc.
Since H20’s smart contract is deployed on Arbitrum, assets on the Arbitrum chain (such as USDT, USDC, ETH, and WETH) can be used to obtain H20 shares.
Users can hold ETF assets on the chain through H20 in two main forms (both with 0 fees).
The first is minting: users directly convert a basket of tokens into corresponding ETF shares (in token form) through smart contracts. For example, according to the current index token component weights, on the official website's "Mint" page, enter the H20 ETF shares you want to obtain, and the required number of token components will be automatically calculated.
As long as the number of 20 corresponding tokens in the linked wallet is greater than (equal to) the required number, H20 ETF shares can be minted:
The user enters the number of ETFs to be purchased, and Haya automatically calculates the number of each component currency included;
Minting: deducting the corresponding amount of component coins from the user's wallet to the smart contract;
The smart contract transfers the user's component coins into the fund pool kept by the contract;
Trigger the minting contract function and transfer the corresponding amount of ETF to the user;
The other is more direct, which is buying - users purchase ETF shares (in token form) that have been minted from other minters or holders through DEX.
The implementation logic of redemption is opposite to the two implementation methods of minting. The advantage of this is that it gives users the power to freely combine assets. Any user can create a cryptocurrency ETF and accept user fund injections.
summary
The market always likes to overestimate the short-term effects of new things and underestimate their long-term impact.
Mapping to the on-chain world, based on the diversity, operability and programmability of the Web3 ecosystem, DeFi products have long been stacked and combined with each other like Lego blocks to create innovative and diversified financial products. However, for the increasing number of incremental crypto users, this means dazzling learning costs and investment thresholds.
At the same time, crypto ETF funds listed on traditional securities markets such as Nasdaq are essentially traditional securities transactions. Compared with the blockchain world, which has 24/7 non-stop trading and extremely fast innovation and iteration, there is still a lag in both portfolio creation and trading.
Therefore, how to help crypto users freely create investment portfolios on the chain, such as a package of new public chains, DeFi tracks, and even more segmented scenarios, while directly conducting instant and simple multi-exposure asset allocation, is a topic that the crypto world needs to seriously consider in the face of incremental users.
Therefore, decentralized ETF platforms like H20 under Haya can meet such needs more professionally and try to provide service products that directly perform a package of simple asset allocation for a certain track or segment on the chain. This deserves continued attention.