In recent weeks, the crypto-investing community has been in a sort of holding pattern, with much of the focus on the US SEC and its decisions regarding Bitcoin ETFs. Initially, the SEC also rejected the so-called WINKLEVOSS ETF in its second review, and later, authorities announced that a decision on the approval of the Cboe Global Markets Inc.-backed Bitcoin ETF would not be made until September 30, 2018. As a result, panic spread, sending cryptocurrencies into a sharp decline. Bitcoin (BTC) dropped below the critical USD 6,000 level in some instances, while Ether (ETH) faced even steeper losses, partly due to fears about ICO project operators selling off their ETH, causing it to fall under the USD 260 threshold. In short, the mood was grim.
However, just yesterday, UK-based CoinShare Holdings Ltd. lifted the crypto community’s spirits. Bloomberg reported that its Swedish subsidiary, XBT Provider AB, would begin listing its Bitcoin Tracker One (symbol: CXBTF) in US dollars. This instrument, which has been traded on NASDAQ Stockholm since 2015, has previously only been quoted in SEK but will now be available in USD. The availability of the US dollar quote, effective from Wednesday, positions this ETN for easier access by US investors to the regulated crypto market.
Unlike ETFs, ETNs are structured as “debt” instruments rather than “equity.” Essentially, these products are not backed by the underlying assets but by the issuer itself. In this case, XBT Provider AB issues certificates that track the performance of the cryptocurrencies. These certificates are typically non-interest bearing and come with a “Holder Put Option,” allowing the holder to request redemption. Conversely, the issuer has the right to redeem the certificates, effectively repaying the debt.
Currently, XBT Provider offers Bitcoin (Bitcoin Tracker Certificate) and Ether (Ethereum Tracker Certificate) debt certificates. According to the prospectus, additional certificates for Bitcoin Cash, Ethereum Classic, Litecoin, and other cryptocurrencies are planned, along with a Basket Certificate that tracks a mix of cryptocurrencies in a specific ratio.
The funds raised from these certificates are exclusively used to invest in the underlying cryptocurrencies. For instance, the Bitcoin Tracking Certificates track the price of BTC and provide indirect exposure to the crypto market through exchange-traded ETNs, as opposed to direct investment in Bitcoins, which occurs in a less regulated environment.
Following the announcement of these new ETNs, cryptocurrency prices have seen a significant recovery over the past 48 hours. Bitcoin is currently hovering around USD 6,400, while Ether is making its way back toward the critical USD 300 mark.
Analysts have largely praised the Bitcoin ETN, drawing comparisons to the Bitcoin Investment Trust by US-based Grayscale. While shares of the Bitcoin Investment Trust are sometimes traded at over 50% above the Net Asset Value (NAV) of the cryptocurrencies held, meaning they must be purchased at a high premium, the XBT Provider certificates trade with only a slight premium over the NAV.
It remains to be seen how US investors will respond to the European ETN. However, this Bitcoin ETN, now quoted in US dollars, could be a significant step toward the approval of the first crypto-ETF by the US SEC. Bloomberg even referred to it as a “soft-opening” for crypto-ETFs. Whether this ETN has already triggered a market turnaround or simply represents a short-term recovery in crypto prices will only become clear over time.