Mon. Oct 3rd, 2022

How will the Cosmos-Purpose Access ETF purchase Bitcoin?

The upcoming Cosmos-Purpose Access ETF (CBTC) utilises institutional-grade liquidity providers, including Genesis, to help us buy Bitcoin at the best possible price for investors. We do not use retail cryptocurrency exchanges to make our Bitcoin purchases to ensure our transactions are as secure as possible.

Where is Bitcoin custodied?

Your Bitcoin assets are safely held by one of the largest cryptocurrency custodians, Gemini Trust Company, a licensed New York State trust company that undergoes regular bank exams and cybersecurity audits. Day-to-day, your Bitcoin is held in a secure, offline wallet, which is disconnected from the internet, significantly reducing the risk of theft.

Is the Bitcoin held in “hot” or “cold” storage?

The Bitcoin in CBTC is held in secure, offline storage, which is also known as “cold” storage because it is not actively connected to the internet. We do use an online or “hot” wallet, but only for transitory purchases when CBTC is buying and selling Bitcoin. CBTC only invests in and holds 100% physically settled Bitcoin.

Is the Bitcoin in CBTC safe? What about if it gets hacked?

Just like your bank account, there is always the risk of theft. We can’t guarantee there is no risk. However, we’ve taken every precaution possible to make sure your assets are safely held. There have been multiple instances of Bitcoin being “hacked.” These stories are true but typically happen with unregulated exchanges that lack proper controls. Our custodian, Gemini, has ensured its assets for up to $200 million against theft.

What Bitcoin price is used to calculate the net asset value of CBTC?

CBTC uses the Tradeblock XBX Index to calculate its Net Asset Value.

What is currency risk?

When buying an Australian-listed ETF that holds assets in a different currency, an investor takes on currency risk. This risk can either help or hurt performance, depending on whether our dollar strengthens or weakens against the foreign currency.

Why is CBTC down and Bitcoin up?

The price of Bitcoin is often quoted in US dollar terms, both in the media and on websites. Since CBTC will be purchased in Australian dollars by Australians, holders should monitor the Australian dollar Bitcoin price pairing to exclude US dollar currency impacts.

Why CBTC is the best way to gain exposure to Bitcoin
Do you hold actual Bitcoin or is it a synthetic exposure, like a derivative or futures contract?

CBTC only invests in and holds 100% physically settled Bitcoin via the Purpose-Bitcoin ETF.

Why does it matter if I own “real” Bitcoin, why not just buy a derivative (ie. Futures)

Futures contracts have a finite lifespan. That means the fund manager has to sell expiring contracts and re-buy the contracts with a later date. This process creates a gain or loss. In a normalised market, the futures curve is upward sloping, meaning you are selling low and buying high to maintain the same exposure to Bitcoin. By owning physical Bitcoin, an investor doesn’t need to worry about losses associated with continuously selling and rebuying futures contracts. You simply own Bitcoin.

Why should I use CBTC instead of using a cryptocurrency-specific account/brokerage?

There are four core advantages to CBTC over a Bitcoin marketplace:

Taxes: While you can purchase an ETF in a tax-deferred or tax-free registered account, Bitcoin marketplaces can only allow purchases through non-registered, taxable accounts.
Ease: There are several steps to purchasing Bitcoin through a marketplace. When you buy an ETF, you don’t have to worry about custody, security, or a host of other issues.
Security: Currently, Bitcoin marketplaces are much less regulated than security exchanges. Investors need to take additional steps to protect their assets from cybersecurity and theft, like constructing or contracting their own cold wallet.
Execution: Individual marketplaces have been known to have pricing issues relative to other marketplaces. By using a proprietary index methodology from our partners at TradeBlock, we are insulated from pricing anomalies that have been documented at individual marketplaces.
Why buy an ETF instead of closed-end fund (CEF)?

An ETF provides a more pure exposure to Bitcoin and the structure better reflects what investors are looking for – to track the price of Bitcoin. Unlike ETFs, closed-end funds cannot quickly add or remove units to maintain consistent exposure. This means that closed-end funds may trade at a premium or a discount, depending on the amount of demand. In a Bitcoin fund trading at a premium, investors may incur losses from both a decline in the price of Bitcoin and the premium being compressed. CBTC has a robust creation and redemption process that allows exposure to expand and contract as necessary to accommodate demand.

Bitcoin trades 24 hours, does CBTC also?

No, it’s just not possible. Once it is available in Australia CTBC will trade only during Australian market hours, 10:00AM – 4:00PM AEST, Monday – Friday (excluding Australian holidays).

What are the best times in the day to buy CBTC?

Once launched, CBTC can be bought anytime throughout Australian market hours. Despite this, we recommend using a limit order and avoiding purchases near market open (9:30AM AEST) and close (4:00PM AEST)

By kao186

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