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Bitcoin ETN Makes its Debut in the United States

Investors in the United States who wish to trade Bitcoin without having to buy the cryptocurrency have been given another route to the top-ranked virtual currency via Bitcoin Exchange Traded Notes (ETN).

Details of the Bitcoin ETN

According to Bloomberg, starting Wednesday American investors will now have access to Bitcoin Tracker One, and BTC ETN. The product which runs under the CXBTF ticker will be quoted in U.S. dollars. However, the clearing and settlement of the trade will be in Krona and Euro since the product is listed and regulated in Sweden.

The ETN is issued by XBT Provider, a subsidiary of CoinShares. The company developed the product in 2015. In July 2018, Amsterdam-based EU speed trading behemoth, Flow Traders became the first company to participate in the BTC ETN market.

For Americans, trading is this particular Bitcoin ETN is like purchasing a U.S. depository receipt in that a foreign-listed asset is denominated in U.S. dollars. Commenting on the ETN, CEO of Coinshares, Ryan Radloff said:

Everyone that’s investing in dollars can now get exposure to these products, whereas before, they were only available in euros or Swedish krona. Given the current climate on the regulatory front in the U.S., this is a big win for Bitcoin.

ETN Might Represent a Soft Opening for Bitcoin ETF

The introduction of BTC ETN trading capability in the United States could be seen as a soft opening for the much sought after Bitcoin exchange-traded fund (ETF). The SEC has far remained unmoved in its reticence concerning issuing approval for any BTC ETF.

Recently, the Commission denied the Winklevoss twins’ ETF application while postponing its decision on the VanEck/SolidX, as well as the Direxion filings. According to the SEC, issues relating to liquidity, custodial tools, and price manipulation haven’t been sufficiently addressed.

ETNs and ETFs are similar in some respects as they provide an opportunity to invest in an asset without actually owning the asset. Such a trading avenue seems perfect for cryptocurrencies given their price volatility. However, a few subtle differences exist between the two. Rather than being an asset pool, ETN is more like a debt instrument that is backed by a bank or any other recognized issuing institution.

Do you think the Bitcoin ETN will gain traction in the American market? Keep the conversation going in the comment section below.


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European Speed Trader Begins Trading Bitcoin and Ethereum Exchange Traded Notes (ETN)

Flow Traders NV, the biggest speed trader in the EU, has started trading Bitcoin and Ethereum exchange-traded notes (ETN). The ETN is being offered by XBT Provider who in 2015 and 2017 launched both BTC and ETH ETNs respectively. The Amsterdam-based Flow Traders becomes the first company to participate in the cryptocurrency-backed ETN market.

Details of the ETN

XBT Provider, responsible for the BTC and ETH ETN is listed on the Swedish stock exchange. The company reportedly controls an asset base worth over $1 billion. Flow Traders hopes to leverage its pedigree as a speed trading behemoth to hedge each trade. By so doing the company plans to maximize its profits from the market.

The price movement of either virtual currency does not in any way affect the profitability of the ETN trade. The company also announced that it would hedge its ETN trading with futures contracts offered by both the CME and Cboe. The aim of doing this is to eliminate liquidity shortages as well as reducing slippage.

Dennis Dijkstra, the CEO of the company, says this approach will be highly profitable for the company. He, however, did not discuss how the company plans actually to hedge each trade. The main question whether it will utilize the underlying cryptocurrencies – Bitcoin and Ethereum.

ETN is in a sense similar to ETF. They both allow people to invest in a commodity without actually having to hold that commodity. The only difference is that with ETFs, the trader invests in a fund that tracks the price movement of the underlying asset while for ETNs, the trader is more or less investing in a bond.

Bitcoin and Ethereum ETN Trading

By becoming the first company to trade a cryptocurrency-backed ETN, Flow Traders seems to be setting a standard that bridges both the mainstream and virtual currency finance industries. Not since the emergence of Bitcoin futures in late 2017 has there a cryptocurrency investment avenue tailormade for mainstream investors. Like futures trading, ETNs aren’t affected by the volatility of virtual currencies – something that is anathema to many institutional traders.

Speaking on the ETNs, Dijkstra said:

People underestimate crypto. It’s big, and it is to be regulated very soon. The market participants are much more professional than people think. Institutional investors are interested – we know they are because we get requests.

Opposition from Regulators

While Dijkstra is optimistic about the prospect of the ETN, regulators from the Netherlands don’t share the same view. Nienke Torensma, a spokesperson for the Dutch Authority for the Financial Market said:

We discourage activities in cryptos both by consumers and professional license holders. By virtue of its newness and the anonymity it potentially offers, it is very prone to abuse. Given its inability to serve the promised purpose as a currency, we don’t regard it to be an asset class.

For now, there is precious little that regulators can do against the ETNs seeing as they are listed on a regulated stock exchange market.

What do you think about Flow Trader’s new BTC and ETH ETN trading product? Do you think this development will hasten the emergence of cryptocurrency-backed ETFs? Keep the conversation going in the comment section below

Image courtesy of Getty Images.