While U.S. traders continue to wait for regulatory clearance for the cryptocurrency-based exchange traded fund (ETF), other marketplaces across the globe are taking the lead in launching the popular product that offers dual benefits of stock-like real-time trading and mutual-fund-like diversification. (See also: SEC Considers Rule Change to Allow Bitcoin ETFs.)
Singapore-based cryptocurrency trading platform Huobi has announced the launch of a new cryptocurrency-based ETF that will allow a convenient option to investors take exposure in a basket of various cryptocurrencies through a single holding.
The ETF is called HB10, and is open for subscriptions starting today. However, any necessary purchases in the ETF units can be made only through cryptocurrencies that include bitcoin (BTC), ethereum (ETH), tether (USDT) and Huobi token (HT). Investments using fiat currencies are not allowed.
The exchange charges a tiered trading fee that reduces to zero based on the invested amount. Investments up to 500,000 USDT is charged 0.10% fee, between 500,000 to 1 million USDT is charged 0.05%, and between 1 million to 10 million is charged a zero fee.
Underlying Huobi 10 Index
Calling itself the "weather vane of digital assets,” the ETF will be based on the Huobi 10 Index and attempts to replicate its performance. The index was launched by the Huobi Group late last month, and it has the 10 largest cryptocurrency constituents in terms of market capitalization and strong liquidity on the Huobi Pro platform.
All listed coins that are traded against USDT on Huobi Pro will qualify for inclusion in the index. Any blockchain-based asset that falls into any of the four categories—coin, platform, application or real asset token—can qualify to enter the index. Coin indicates the digital currencies like bitcoin that are used as a transaction medium; platform indicates framework and assets on the blockchain platform like ethereum that support a variety of usages; applications are tokens linked to functions, features and artifacts that run on the blockchain; and real asset tokens are those that are linked with real-world assets like gold or U.S. dollars, like tether. (See also: Is Stablecoin the Answer to All Cryptocurrency Problems?)
The HB10 ETF will also offer ease of investments in a mixed basket of cryptocurrencies to the institutional as well as retail investors. While the cryptocurrency ETF will be available to global investors including those in China, it is currently not available to the U.S.-based customers owing to the local regulatory stalemate in America over the cryptocurrency-related ETFs.
Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns no cryptocurrencies.