Thomas Daniels
As Evolve Funds seeks to provide new products targeted at luring investors back from the U.S., leveraged Bitcoin and Ethereum exchange-traded funds (ETFs) may soon be introduced, potentially expanding Canada’s cryptocurrency ETF market.
Due to reduced costs, increased trading volume, and the introduction of spot Bitcoin ETFs in the United States, investors have been moving their money southward, causing substantial capital outflows from Canadian crypto ETFs for months. The Globe and Mail reports that in response, Toronto-based asset manager Evolve Funds has submitted a preliminary prospectus to introduce Canada’s first leveraged cryptocurrency exchange-traded funds.
The Evolve Levered Bitcoin ETF and Evolve Levered Ether ETF will offer 1.25x leveraged exposure to Ethereum (ETH) and Bitcoin (BTC) if they are approved. Evolve will employ cash borrowing rather than derivatives, and the funds will rebalance on a monthly basis rather than a daily basis, even if this leverage is less than the 2x exposure provided by certain U.S. funds.
Outflows from Crypto ETFs and Government Investigation
Outflows from Canada’s cryptocurrency ETF market have continued for five months in a row, indicating the market’s difficulties in 2024. Since the launch of U.S. spot Bitcoin ETFs in January 2024, investors have pulled out more than C$1.1 billion, according to National Bank Financial.
In the meantime, worries about cryptocurrencies’ involvement in illegal financial activity have increased. The Canadian government raised concerns earlier this year about the growing use of digital assets, such as stablecoins, in the illegal drug trade. According to a report by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), cryptocurrency is being used to circumvent conventional banking systems and enable international drug transactions.
In light of regulatory scrutiny and changing market dynamics, Evolve’s decision to launch leveraged crypto ETFs is a turning point for Canada’s digital asset investment environment and could alter investor opinion.
