B3 ETFs accumulate losses of up to 68% in a year but do not lose investors, according to a survey

Data from the end of April, from B3‘s latest monthly bulletin, the Brazilian Stock Exchange revealed that cryptocurrency Exchange Traded Funds (ETFs) accumulated losses between 10% and 68%, although the numbers indicated the maintenance of shareholders, despite the negative effects of macroeconomic factors in the financial markets which, in the assessment of managers’ representatives, tend to be more felt by digital assets because of the tendency of investors to seek assets considered more stable.

HASH11, a cryptocurrency index fund that replicates the asset performance of the Nasdaq Crypto Index (NCI), was traded on the Brazilian market with 149,438 shareholders. This represents a jump of almost 430% compared to the 28,358 shareholders on the first day of trading, April 26, 2021.

Managed by asset manager Hashdex, HASH11 almost doubled its volume, going from BRL 1 billion to BRL 1.98 billion in an interval of one year. On the other hand, the crypto asset has accumulated a loss of 51.13% since its listing. Which is not an isolated case according to a survey by Coindinheiro pointing out losses ranging between 10% and 68% in the ETFs listed on B3. This was the case of QDFI11, the world’s first 100% ETH invested in decentralized finance (DeFi). The crypto asset, launched by QR Asset Management and that accompanies Bloomberg Galaxy DeFi Index, closed down 68.11%.

The drop in ETFs led some managers to issue a statement to investors, according to Infomoney. Hashdex, for example, manager of 77% of B3’s ETF market, in a letter signed by the head of research Carlos Eduardo Gomes and the manager João Marco Cunha explained the factors responsible for the sharp drop. Among the factors listed are the war between Russia and Ukraine, interest rate hikes by central banks and global restrictions on supply chains.

In arguing that the increased correlation of ETFs with traditional markets since the beginning of the pandemic and that the higher correction of crypto-assets is something natural, Eduardo Gomes said that:

This scenario may momentarily lead to a reduction in exposure to risky assets in search of assets considered safer. This phenomenon may be potentiated by the entry of more institutional investors into the crypto market.

Hashdex also pointed to the collapse of the Terra blockchain network (LUNA) which has lost almost 100% of its market value, as another negative factor for the crypto asset market.

Manager QR Asset also sent a statement to shareholders saying that they need to be aware of the difference in quality of ETFs and the incentives of each project.

In the case of the Terra/Luna project the maxim ‘there is no such thing as a free lunch’ proved true and the project collapsed. Today we have a contagion scenario in the market, so we can expect a lot of volatility until we find a new equilibrium point. Investors with long-term horizons can take advantage of depressed prices to get good entry points,” said investment director Alexandre Ludolf.

To Infomoney, Ludolf added that the low bailout move reflects the maturing of the ETF and cryptocurrency industry. Positioning similar to the head of expansion at Hashdex, Roberta Antunes: I don’t think what will bring people into the cryptocurrency market is timing or macro variations, but rather education about the technology, she argued.

Third country to offer exposure to Bitcoin through index funds, Brazil is experiencing a different reality from that of the U.S., where the Securities and Exchange Commission continues to veto similar initiatives, as reported by the Cointelegraph Brazil.