Bitcoin ETF has been the big story of 2018 in the cryptocurrency space. But, a similar product already exists and with it, investors in US markets will be able to allocate more funds into the bitcoin market.
Exchange-Traded Notes (ETNs) in Sweden
Nine companies have applied to the US Securities and Exchange Commission (SEC) to operate a bitcoin exchange-traded fund (ETF) in the US stock market. The Chicago Board Options Exchange (CBOE) and VanEck bitcoin ETFs are said to have the highest probability of being approved by the SEC by early 2019.
ETFs are publicly tradable instruments listed on the stock market which allow investors to trade assets and commodities with their brokerage accounts. Through ETFs, investors in the stock market can invest in commodities like copper and gold.
Investors in the cryptocurrency sector including BKCM founder Brian Kelly and Fundstrat analyst Tom Lee have said that the introduction of a bitcoin ETF in US markets will effectively legitimize the bitcoin and cryptocurrency market, opening the cryptocurrency sector to a group of investors who were previously not able to invest in BTC, possibly due to regulatory conflicts.
However, it is not entirely true that investors in the traditional finance market cannot already invest in BTC and cryptocurrencies as a new asset class.
Since early last year, an ETN in Sweden operated by XBT Provider has demonstrated a significant increase in its volume, surpassing the volume of 80 percent of ETFs in the US.
Eric Balchunas, an ETF expert, said on Twitter in December:
“Sweden’s bitcoin ETN is now bigger and trades more than about 80% of US ETFs. It hit $700m in aum today while trading $220m this week (insane #s for Sweden)”
This week, the same ETF mentioned by Balchunas last year, opened in US markets under the ticker CXBTF.
“Given the current climate on the regulatory front in the U.S., this is a big win for Bitcoin. Everyone that’s investing in dollars can now get exposure to these products, whereas before, they were only available in euros or Swedish krona,” he said.
Is ETN as Good as an ETF?
Last year, billionaire investor Mark Cuban, the owner of the NBA team Dallas Mavericks, said in an interview with Bloomberg that he facilitated his first investment in bitcoin via the XBT Provider bitcoin ETN.
“It is interesting because there are a lot of assets which their value is just based on supply and demand. Most stocks, there is no intrinsic value because you have no true ownership rights and no voting rights. You just have the ability to buy and sell those stocks. BTC is the same thing. Its value is based on supply demand. I have bought some through an ETN based on a Swedish exchange,” said Cuban.
In a way, ETN provides similar liquidity and ability to investors in US markets to freely invest in bitcoin in the stock market.