ETFs have been trading in the United States, Canada, and some other countries for a while now. These ETFs have made strides so far with high volumes traded in throughout their existence in the market. However, none of these ETFs have offered mostly dividends to their investors. An asset management firm in Canada has now made history as the first to offer a monthly yield to those invested in its ETF.
Edging Towards The Future
Purpose Investment has first made headlines in February when it created the first North American ETF that tracks the price of Bitcoin. This time around, the investment firm has made another stride in becoming the first to launch an ETF that pays monthly yields to investment. This puts Canada at the front of the race when it comes to crypto ETFs and the purposes which they serve.
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The Bitcoin and Ethereum ETF will offer investors monthly yields using a derivatives-based covered call strategy. Like the ETFs, the strategy is another first of its kind in the crypto market.
The annual yield of the ETFs is also attractive according to estimates. Market experts explained that although there is no way to guarantee what the amount would be each month, it is expected to be the equivalent of 8% to 10% annual yield, with 1.10% going to the firm as a management fee.
BTC trending south of $57K | Source: BTCUSD on TradingView.com
Canada is ahead of the U.S. in the ETFs market and currently has approved Ethereum ETFs whereas the latter is still yet to approve its first Ethereum ETF. Both Bitcoin and Ethereum ETFs offered by Purpose Investment will pay out similar yields and are classified as income in non-registered accounts.
ETFs Making Waves
ETFs have offered investors a way to get exposure to the cryptocurrency market without having to purchase any of the digital assets themselves. The anticipation for their approval shone through with the first-ever Bitcoin ETF approved in the United States, the ProShares Bitcoin Futures ETF, which saw over $1 billion in trading volume after the first day.
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ETFs, however, do not shield investors from the highly volatile nature of the market. For the Purpose Investment ETFs, investors are shielded to a certain extent by these fluctuations. They will enjoy the benefits of monthly yields, but will also see limited capital gains compared to those who do not for this reason.
“Given the connection between the volatility of the underlying asset and premiums, covered call strategies on cryptocurrencies offer unique exposure to a unique asset class, providing investors a high yield without sacrificing significant price participation.” – Vlad Taveski, COO & Head Of Product, Purpose Investments
Tasevki told “Yahoo Finance Canada” that investors are allowed to choose if they wish to earn these monthly yields on their investors. It is a way to generate short-term income using covered calls on assets which they believe in.
Featured image from Investment U, chart from TradingView.com