Purpose Investments, a Toronto-based money manager, unveiled three new funds on the Toronto Stock Exchange on Tuesday, November 30. These are the first crypto assets trading on stock markets that will pay out a monthly yield, CBC Canada reported. Purpose also launched the first Bitcoin (BTC/USD) ETF in the world earlier this year.
Targeting a wider range of investors
The new funds target investors who are interested in exposure to cryptocurrencies in more conventional ways. ETFs trade on stock exchanges, making them easier for regular people to trade. At present, Purpose’s most heavily traded Bitcoin fund has more than 24,000 BTC, worth quite a bit of money at current rates – $2.5 billion USD according to Purpose CEO Som Seif.
High demand for crypto despite drawbacks
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Bitcoin mining attracts severe criticism for its massive environmental footprint. In addition, the security of cryptocurrencies makes them an easy way to move and launder money. Despite these apparent drawbacks, investors keep pouring money into the market, which is why Purpose is trying to offset volatility while catering to them at the same time.
How the dividends work
Purpose will apply a covered-call strategy to generate income based on fund holdings and distribute it to holders on a monthly basis. This is the first time an institution will be using this strategy with cryptocurrencies. Investors will be getting some returns even when crypto prices are falling.
The monthly payout will vary unlike a dividend on a stock, which tends to pays out a steady and predictable amount on a regular basis. Seif promises:
We anticipate this to pay a pretty high yield, north of eight per cent, for sure. But we think it will pay double-digit yield over time.
Risk remains, value of fund is pegged to crypto
There is no guarantee of a huge yield over time because the price of the funds’ units will be pegged to that of Bitcoin or Ethereum (ETH/USD). If there’s any chance of achieving the promised yields, the payouts compare to the gains dividend-paying stocks can produce quite favorably, surpassing them by a long shot.
67% of retail CFD accounts lose money