In a landmark move for the Thai financial market, the Securities and Exchange Commission (SEC) has given the green light to One Asset Management (ONEAM) to launch the country’s first Bitcoin exchange-traded fund (ETF). The ONE Bitcoin ETF Fund of Funds Unhedged and not for Retail Investors (ONE-BTCETFOF-UI) is set to be distributed between May 31 and June 6, with an investment risk level of eight.
According to a report published earlier today by Bangkok Post, the fund, which is limited to wealthy and institutional investors, aims to invest in 11 leading global funds to ensure liquidity and safety. ONEAM has emphasized the importance of storing coins using international standards and has undergone reviews by international regulatory agencies in the United States and Hong Kong.
Pote Harinasuta, chief executive of ONEAM, believes that digital assets, such as Bitcoin, offer investors an alternative asset class with low correlation to other financial assets, thereby helping to diversify investment risks. The approval of ONEAM’s Bitcoin ETF comes amidst a growing international recognition of these funds, particularly after the US SEC allowed the creation of funds that invest directly in spot Bitcoin through ETFs earlier this year. Additionally, Hong Kong’s Securities and Futures Commission permitted the establishment of ETFs investing in both Bitcoin and Ethereum in April.
Despite the limited supply of Bitcoin, capped at 21 million, demand for the cryptocurrency is on the rise as it gains popularity. Harinasuta sees high growth potential for Bitcoin, citing its average return of 124% per year over the past 11 years. However, he also acknowledges the high volatility associated with the asset, which averages 83% annually.
To strike a balance between returns and risk, ONEAM recommends investors allocate only 5% of their portfolio to Bitcoin. This allocation is expected to generate a return of 8.90% per year, with a Sharpe ratio (a measure of risk-adjusted return) of 0.71 and a maximum drawdown of -22.4%. In comparison, a portfolio without Bitcoin would yield a return of 5.80% per year, with a Sharpe ratio of 0.48 and a maximum drawdown of -20.4%. These figures suggest that holding Bitcoin can improve the expected return and Sharpe ratio, despite a slight increase in overall volatility.
One of the key features of Bitcoin ETFs is the security of coin storage. Harinasuta points out that investing in Bitcoin directly through various platforms can be risky, with past issues including data loss or stolen digital assets via online systems. By investing through ETFs, unitholders’ data and coins are distributed through custodians, employing the same standards used by institutional investors. This involves storing coins offline, which he says is considered highly secure.
Interestingly, today also marked the start of trading for Australia-based Monochrome Asset Management’s Monochrome spot Bitcoin ETF (IBTC) on the Cboe Australia exchange. As CoinDesk reported yesterday, before the introduction of IBTC, Australian investors could only invest in ETFs that held Bitcoin indirectly or through offshore Bitcoin products. These options did not provide the investor protection afforded by the directly held crypto asset under the Australian Financial Services Licensing (AFSL) regime, according to the announcement.
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