Heavyweight VanEck wades into crypto ETP territory as sector sees significant growth

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ETF heavyweight VanEck launched a bitcoin ETN this week on Deutsche Börse, the latest launch in series of products focused on cryptocurrencies, and significant because VanEck represents the ETF establishment stepping into this somewhat esoteric world.

The VanEck Vectors Bitcoin ETN enables fully-collateralised investment in Bitcoin as it is fully backed by bitcoin and so reflects the performance of the Bitcoin price. Commenting on the launch, Martijn Rozemuller, Head of Europe at VanEck said: “Bitcoin's low correlation to other asset classes makes it an excellent way to contribute to the diversification of a portfolio. With our VanEck Vectors Bitcoin ETN, we offer a product that allows investors to benefit from the performance of bitcoin”. 

However, the firm writes that instead of requiring a so-called wallet, as is customary with cryptocurrencies, in which bitcoin is stored separately from the rest of the portfolio on the blockchain, the purchase and storage of ETN is as uncomplicated as trading in shares or ETFs.

The listing of the VanEck Vectors Bitcoin ETN in the regulated segment of Deutsche Börse Xetra allows investors to buy and sell the new product in the same way as other regulated exchange-listed products. 

The same week has brought news that HANetf’s BTCetc Exchange Traded Bitcoin (BTCE) has passed USD160 million in assets under management and has enjoyed record trading, with the highest turnover of all listings on XETRA’s ETN segment for October 2020 and November year to date.

The firm writes that since listing on Deutche Boerse’s Xetra in late June 2020, BTCetc Bitcoin Exchange Traded Crypto (ticker BTCE) has become the most liquid 100 per cent physically backed bitcoin ETP in the world with a record trading volume day on 18 November of over two million units or USD36million. 

Meanwhile, according to James Butterfill, head of research at cryptocurrency ETP specialists’ CoinShares, a relationship is building between bitcoin and gold. The week of 23rd November saw a new record of USD465 million in inflows, although, he notes, that as a proportion of total investment products, it still hasn’t broken records.

“Weekly inflows as a percentage of assets under management were 3.7 per cent, close to the record inflows of 4.2 per cent set in June this year…highlighting extremely bullish sentiment towards bitcoin,” he writes.

“Bitcoin and gold investment product flows have diverged, likely due to the increasing legitimisation of bitcoin while outflows in gold are likely due to rising hopes of an effective vaccine, rather than investors switching to Bitcoin,” he warns.

In the ETF Express interview with CoinShares’ Frank Spiteri and Townsend Lansing, the pair cites increased corporate interest in bitcoin.

November has also seen Swiss issuer of crypto ETPs, 21Shares AG, approved by the Swedish Financial Supervisory Authority, meaning it can ‘deploy’ institutional-grade products in Switzerland and Europe on regulated segments of stock exchanges. 

21Shares AG has launched a total of 11 different products in four currencies on all regulated exchanges in the DACH (Germany, Austria and Switzerland) region, and has USD150 million under management.

However, the UK authorities remain relatively unimpressed with the crypto investment sector. The UK’s Financial Conduct Authority’s ban will come into effect on 6 January 2021 with the FCA warning s that UK consumers should continue to be alert for crypto-derivative investment scams, writing: “As the sale of derivatives and ETNs that reference certain types of cryptoassets to retail consumers is now banned, any firm offering these services to retail consumers is likely to be a scam”.

 

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