Investors tired of waiting for a decision by the U.S. Securities Exchange Commission (SEC) on an upcoming bitcoin exchange-traded fund (ETF) now have an alternative – a bitcoin ETN.
As reported by Bloomberg, Swedish company XBT Provider, a subsidiary of UK-based company Global Advisors Limited, has created an exchange-traded note (ETN) called ‘Bitcoin Tracker One’ that can be traded directly with U.S. dollars via the ticker CXBTF.
While a similar product is already available in the form of the Grayscale Bitcoin Investment Trust (GBTC), this new bitcoin ETN is far cheaper and has much higher liquidity. The Grayscale GBTC shares reportedly trade at an almost 50 percent markup on the original BTC price.
How the bitcoin ETN can help U.S. investors
The bitcoin ETN is only available via Nasdaq Stockholm in Sweden, but since it is available as an F-share quoted in USD, it’s easily accessible to U.S. investors. Previously the product was only available for investment via euro or Swedish krona.
Fundstrat’s Thomas Lee announced his excitement at the new listing via Twitter and pointed out the better return on investment (ROI) compared to GBTC:
“CRYPTO: @CoinSharesCo just announced a #Bitcoin ETN quoted in USD (ticker: CXBTF). Similar to GBTC, so traditional brokerage account can buy. @coinshares products trade at NAV (we talked about before) so returns virtually identical to #Bitcoin.”
Lee went on to note the similarity that the bitcoin ETN shares with a bitcoin ETF regarding physical BTC stock held by CoinShares, the company that maintains bitcoin shares for XBT Provider.
Ryan Radloff, CEO of CoinShares, believes this is a big win for bitcoin considering the current regulatory climate in the United States. He also stated the competitive price difference CXBTF will have against GBTC.
“Our products historically have not traded at a premium and are liquid,” he said.
Shortfalls of a bitcoin ETN
However, there are certain elements of the new product that differ significantly from a bitcoin ETF. Since the product is managed by a Swedish company, all BTC is purchased in Swedish kroner, meaning investors are subject to exchange rates and associated costs. As the company notes in its announcement, this may affect (positively or negatively) the market value and final return from the product.
U.S. investors can open an account with XBT Provider through their bank or online broker after which they can purchase certificates which are 100 percent hedged and guaranteed by Global Advisors (Jersey) Limited.
If the new product is widely-adopted by U.S. investors and performs well it may have a positive effect on the SEC’s decision making process regarding a bitcoin ETF. Recently, the much-touted VanEck/SolidX bitcoin ETF decision was delayed until September 30 following a second rejection of the Winklevoss bitcoin ETF a few weeks earlier.
Potential problems with a bitcoin ETF
Earlier this week, bitcoin advocate Andreas Antonopoulos uploaded this video to youtube outlining his feelings regarding a bitcoin ETF. He believes a bitcoin ETF is a terrible idea that would open the market to increased manipulation by institutional investors.
Personally, I couldn’t agree more. Massive institutional investment in bitcoin might cause a short-term price spike but in the long-term would only serve to further centralize the network and take power away from the original community.
While some might see the SEC’s delay in coming to a decision as negative, I believe they are likely taking into account the best interests of not only the wider global economy but that of the cryptocurrency market too.
Mark Hartley is an IT specialist, freelance writer, keen traveler, and blockchain enthusiast. He has worked on the trading floors of the world’s biggest interdealer broker in London and helped integrate crypto-services into IT trading systems. When he’s not searching for the world’s most beautiful beach, he’s nose deep in any crypto and blockchain related news.