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DOES A EUROPEAN BITCOIN ETN SET STAGE FOR A BULL RUN IN CRYPTO-MARKETS?

In recent weeks, the community of crypto-investors was sort of paralyzed and had focused on the US SEC and its decisions regarding the requested Bitcoin ETFs. Initially, the so-called WINKLEVOSS ETF was also rejected by the SEC in the second round and subsequently announced by the authorities that the decision on the approval of the ETF applied for by Cboe Global Markets Inc. would not be announced until September 30, 2018. Consequently, the cryptos have fled south in a panic. The key currency Bitcoin (BTC) has fallen below the critical USD 6,000 mark in some cases. The Ether (ETH) has lost much more in view of the fears about the sale of ETH by the many ICO project operators and fell below the USD 260 mark. In short, a disastrous mood was called for.

Yesterday, the UK-based CoinShare Holdings Ltd released the crypto community from its bearish mood. Bloomberg reports that its Swedish subsidiary XBT Provider AB will now also quote its Bitcoin Tracker One (symbol: CXBTF), which has been listed on the NASDAQ Stockholm since 2015, in US dollars. Bitcoin Tracker One is an Exchange Traded Note (ETN) and has been traded on the NASDAQ Stockholm since 2015 already but has not yet been quoted in US dollars. With the US dollar quote available since Wednesday, ETN is also positioned for easy entry into the regulated crypto-area for US investors.

Unlike ETF’s, ETN’s are not structured as “equity” but as “debt” instruments. In other words, they are not backed by the underlying assets, but by the issuer. The issuer XBT Provider AB issues certificates, which track the performance of the underlying cryptocurrencies. Typically, these non-interest bearing certificates are equipped with a “Holder Put Option” entitling the holder of a certificate to request a redemption. The issuer, on the other hand, is entitled to redeem certificates, i.e. pay back the debts.

Currently, XBT Providers offer such debt certificates for Bitcoin (Bitcoin Tracker Certificate) and Ether (Ethereum Tracker Certificate). According to the prospectus (download here) further certificates for Bitcoin Cash, Ethereum Classic, Litecoin and other cryptocurrencies are planned as well as a Basket Certificates in which different cryptocurrencies are then mapped in a certain ratio.

The funds received from the issue of the certificates are used exclusively to invest in the respective cryptocurrency. Bitcoin Tracking Certificates, for example, tracks the BTC price and enable indirect investment in the crypto-area via exchange-traded ETNs instead of direct investment in Bitcoins in a rather unregulated environment.

Parallel to the announcement of these ETN’s, the crypto-prices have recovered strongly in the last 48 hours. The BTC is currently oscillating around USD 6,400 and the ETH is moving back towards the important USD 300 mark.

The analysts welcomed the Bitcoin ETN predominantly euphorically and compared it with the Bitcoin Investment Trust of the US provider Grayscale. While the shares of the Bitcoin Investment Trust are sometimes traded at over 50% above the Net Asset Value (NAV) of the cryptocurrencies held and thus have to be bought at high prices with a massive premium, the certificates of XBT Providers AB are traded at a small premium only to the NAV.

It remains to be seen Provided how US investors will react to the European ETN. In any case, this bitcoin ETN quoted in US dollars could be an important step towards the approval of the first crypto-ETF by the US SEC. Bloomberg consequently describes this ETN quoted in US dollars as “soft-opening” for crypto-ETFs. It remains to be seen whether the ETN has already initiated a turnaround or only provided for a short-term recovery in the crypto markets.

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