An ETF is a financial derivative, more specifically a type of mutual fund that divides ownership of underlying assets – in this case crypto assets – into shares. The ETF tracks the value of these assets and is tradable during the working hours on an exchange. Shareholders are entitled to a share of the fund’s profits, which are based on either longer-term earned interest or short-term speculation on daily market fluctuations.
Huobi’s new ETF – called ‘Huobi 10’ – is based on its recently launched market index, which tracks the exchange’s 10 top-traded digital assets against Tether (USDT) in real time, using a weighted average calculation method.
Huobi suggests the new investment instrument will potentially help new users to gain exposure to the crypto markets by giving them a stake in a diversified basket of assets. This would reportedly allow investors who do not want to follow individual crypto assets to buy into the general market trend and disregard the ‘noise’ of individual coins.
Huobi’s ETF is now open for subscriptions, with an option to pay using either Tether (USDT), Bitcoin (BTC), Ethereum (ETH) or Huobi’s native token (HT). Subscriptions are limited to a range of between 100 USDT and 10 million USDT or equivalent for each account.
Crypto-based ETFs have long been discussed as a potential ‘holy grail’ for the crypto industry. Although a few are already being traded in certain countries – including a Bitcoin-only ETF on the NASDAQ Nordic exchange – ETFs are considered to be a marketable security that requires regulation by government authorities, and their mainstream future in crypto awaits clarification.
In the US, the Securities and Exchange Commission (SEC) continues to debate crypto-based ETFs, having raised concerns over liquidity, volatile valuations and the risks of fraud and market manipulation. The SEC rejected a Winklevoss ETF in March 2017, and this January, two Bitcoin-related ETF proposals were withdrawn at the regulator’s request.