So far it has not been a good year for the supporters of the bitcoin ETF. Since the beginning of the year, a total of 10 potential bitcoin products have been prevented from being listed on the stock exchange by the Securities and Exchange Commission.
Although two other cryptocurrency products are still being assessed by the SEC-an indexed encrypted fund and a bitcoin ETF with a value of $ 200,000, the expectations that a US dollar-denominated ETF will begin to negotiate this issue. year have decreased.
But while the potential bitcoin ETFs have been rejected left and right this month, another product that looks awfully similar to the mythical bitcoin ETF (but it is not) has arrived quietly on the scene.
ETN bitcoins denominated in dollars
The name of the fund is Bitcoin Tracker One, an exchange-traded banknote (ETN) that began trading on the Stockholm Nasdaq in 2015. It was announced as the first bitcoin security to operate on a regulated exchange.
Initially offered only in Swedish krona, ETNs were soon available in euros as well. Then, about three years later, on August 15th of this year, they became available in US dollars.
All of a sudden, US investors could buy and sell a product traded in exchange with regulated bitcoins just as they would for a stock. Dollar-denominated ETNs are quoted out-of-stock on pink sheets under the CXBTF symbol.
The "F" at the end of the ticker symbol indicates that this is a foreign share (F-share), with similarities with an American deposit receipt.
The F shares are canceled, held and settled on the domestic market and in the local currency, but listed and executed in US dollars.
Good as an ETF?
For a US investor with an intermediary account, you are essentially getting easy access to a bitcoin ETN traded in Sweden. For some, it may be as good as the elusive bitcoin-rated ETF in the US that has yet to be approved (see: Bitcoin ETFs are not dead yet).
After all, they are regulated by the Swedish authorities; trade near the net asset value (NAV) with a functioning creation / redemption mechanism; and they are relatively liquid. XBT Provider, the issuer of ETNs, currently has $ 480 million of assets under management in its bitcoin and ethereum ETNs.
Performance of Bitcoin Tracker One and Bitcoin
ETNs have closely followed the price of bitcoins since their inception in 2015
However, there are differences between CXBTF and a hypothetical ETC bitcoin quoted in the United States. For one, ETNs may not be available for trading for all investors. At the moment, the ticker was available for trading on Fidelity, but not on Schwab. Trading is at the discretion of each broker.
Secondly, security does not have the blessing of the United States SEC. It is not surprising. Bitcoin Tracker One is regulated and traded in Sweden; its issuer never intended it to operate in a US exchange.
ETNs have the go-ahead from the Regulatory Authority of the financial industry, the self-regulation body of the financial industry, which must be quoted in dollars and negotiate on the pink plates. But even so, the SEC could theoretically intervene and put an end to it. This does not seem to be something that could happen, according to industry sources.
It is also important to note that an ETN like Bitcoin Tracker One is not an ETF. Although we often group ETNs under the umbrella of the ETF, they are technically different.
ETNs are debt securities that promise some performance schemes; in this case, the price of the bitcoin. This is in contrast to a hypothetical ETF bitcoin, which would maintain the underlying asset.
For all intents and purposes, ETFs and ETNs typically have similar performances, but the latter have a counterparty risk. If the XBT provider ends, a buyer of the ETNs may lose part or all of their investment.
With these warnings aside, CXBTF is certainly an interesting product, and worth considering for US investors eager to get their hands on bitcoins through a traditional brokerage account.
It is superior to the Bitcoin Investment Trust (GBTC), the semi-closed fund that regularly trades with massive premiums (currently 35% compared to NAV).
For investors who wish to further explore the digital asset space, the XBT Provider also has an etherum product, Ether Tracker One, which is now listed in dollars. CETHF, the shared F version of the one year ETN ethereum listed and regulated in Sweden, appeared on the pink sheets on Monday.
If a bitcoin ETF listed in the United States is a long shot, a ETF ethereum listed in the US is an even longer shot. Ethereum does not recognize bitcoin's first-mover name or advantage. It is also more volatile, with a decrease of 66% this year compared to 50% of bitcoins.
That said, ethereum is currently considered a strong n. 2 for bitcoins in the digital resource space, which makes CETHF a convincing option for aspiring cryptor investors.
Email Sumit Roy a [email protected] or follow him on Twitter sumitroy2