BTCE chooses SIX Exchange as crypto currencies continue on volatile path

Andre Buck, SIX

News came in early January that SIX, the Swiss Stock Exchange, had registered the listing of HANetf’s BTCE ETP by ETC Group, further strengthening its position at the forefront of the provision of crypto ETPs.

André Buck (pictured), Global Head Sales & Relationship Mgmt, Markets, SIX, explains that the exchange was one of the earliest to offer listings of ETFs in Europe with the first listing in 2000, and a rapid growth path since then that sees them now with 1600 ETFs from 27 issuers and with 16 marketmakers.

Trading turnover in ETFs fell by 9.9 per cent to CHF112.3 billion, year on year, after a previous high of CHF124 billion, as larger tickets went to other marketplaces. However, the exchange saw a record-breaking increase in trading turnover increased by 25.0 per cent to CHF1,468.1 billion for equities, funds and ETPs, and a new record of 1,668,401 trades in ETFs only were executed (+60.4 per cent), up from over 1 million in 2019.

Buck says: “Looking at it, we see clearly that the main observation is that the number of smaller tickets has increased dramatically.” The buckets of between CHF1 and CHF10,000 saw an increase of over 70 per cent in the number of tickets, mainly coming from smaller, retail investors, many using ETFs through their savings plans.

The exchange’s commitment to regulated products with crypto-underlyings started with the listing of a structured product certificate that tracked bitcoin in 2016 by Bank Vontobel. 

The autumn of 2017 saw bitcoin hit its last heady heights with a price of USD20,000 and in December of that year the exchange saw CHF250 million in trading turnover in the one month from the Vontobel product and others, including a range from Leonteq.

“Then the price dropped to around USD3-400 and the turnover came down to a trickle,” Buck says, commenting on a pattern that is quite familiar in this volatile market. Leonteq continued to create innovative crypto products, with a short certificate and then a reverse convertible, all based on bitcoin.

“Our market is one of the most innovative in respect of financial products,” Buck says. “From that, our segment has grown substantially, attracting more issuers and then Amun or 21 shares who issued the first ETP on Bitcoin in November 2018.
 

“It was well received but bitcoin was stable and didn’t move that much but the timing was good because they could talk to potential clients and then bitcoin became more interesting to a range of investors.

“We focus on providing an infrastructure to investors so they can trade interesting products in a regulated market. Both sides are fairly treated and our regulation has approved a handful more products with crypto currency underlyings so issuers can issue on Ether and other coins.

“We think we are certainly the largest regulated exchange for crypto products. Germany has more trades but, in terms of volume, our is certainly much larger with CHF1.1 billion trading turnover just in crypto products last year, in certificates as well as ETPs. This is up from CHF400 million in the previous year and with the price of the underlying, one can see why.”

Buck comments that talking to the crypto community and fostering this part of the market has allowed them to create a diversified market.

“It is important to have more than one issuer,” he says. “Competition brings innovation and so it is very positive to see the growth. We are giving access to the crypto world.”

Commenting on the UK government’s stance on all things crypto, Buck says: “The crypto world is very interesting but very volatile and one has to be aware of what one is getting into here.

“Everybody has to come to their own conclusion on what is suitable for its investors but Switzerland has a sophisticated investment community and financial industry which can deal with these products and we have a history of innovation in structured products and leveraged products with a focus that lies in regulated markets.

“Both sides, the buyside and the sell side, get a fair trade. If other jurisdictions come to a different conclusion that is obviously on the back of their assessment and one has to accept it.”

The first six days of January 2021 saw trading volume in crypto products at over CHF270 million, setting a new record, and extraordinary when compared to the whole of the previous year’s figure of CHF1.1 billion. “It is incredible,” Buck says. “The mania goes on.”

And it is a bit of a mania, with all the signs of a boom or bust market. Just in early December, the price of bitcoin was, to quote Laith Khalaf, financial analyst at AJ Bell, ‘on the rampage’, as bitcoin prices more than tripled in the last six months of 2020, reaching a record peak of USD34,800 on 2 January.

At the time the XBT Bitcoin Tracker ETF was sitting firmly at the top of the performance table, but Khalaf warned: “However, we have been here before, and the last time bitcoin surged towards a record high, it promptly fell back down to earth with a great big bang. Bitcoin is subject to wild price movements, so anyone thinking of investing in this area should do so with a very small amount of money that they can afford to lose. In a world where the existing currency system is highly digitalised, it’s hard to see where bitcoin can score an edge, particularly when its volatility inhibits use in the wider economy for regular payments such as wages and bills.”

Early January, shortly before adding their SIX Exchange listing to their original Deutsche Borse listing, ETC Group reported that their BTCE ETP had a record trading day with trading volume of over USD100 million, which came after a previous record high of USD54million on 17 December.   

Commenting on that record on the sixth of January, Maximilian Monteleone, Head of Business Development at ETC Group said: “Bitcoin has seen phenomenal interest as the price has increased from USD20,000 in mid-December to USD31,000 yesterday.  Investors seem to be moving into bitcoin because of concerns around major currency devaluation as a result of massive stimulus packages being tabled by governments in response to the COVID crisis.”

The original Crypto ETP, CoinShares' XBT Provider and its line of ETPs also enjoyed record trading volumes on Monday, 4 January, 2021.

The firm reported that with more than EUR162 million (USD202 million) in XBT certificates changing hands traded on the market’s first day of trading in 2021, CoinShares had the highest volume traded in any European listed crypto ETP. 

“We are seeing an unprecedented volume of interest in bitcoin from institutional investors,” said Frank Spiteri, CoinShares’ Chief Revenue Officer. “As wealth managers, private banks and European institutions look to add bitcoin to their portfolios, our ETPs are the logical choice. With over seven years of experience in the marketplace, CoinShares is one of the world’s leading digital asset firms with unparalleled experience and expertise.”

Chief Executive Officer at CoinShares, Jean-Marie Mognetti, said: “The narrative shift around bitcoin over the last six months has been profound. Investors used to consider it a risk to allocate to bitcoin. Now it’s a risk not to allocate to bitcoin. As more investors look to bitcoin as a viable investment option, our XBT Provider products continue to offer exposure to bitcoin via traditional brokerage accounts across Europe, making it easy for investors of all types to gain exposure to bitcoin without the premium associated with other products in the market or the risk of trading and securing your own assets.”

However, profit taking pushed the currency into the red, with another of its famous seesaw movements coming a couple of days later with a fall in bitcoin of around 4 per cent in a few days.

HANetf’s Hector McNeil, the white label firm behind the BTCE product, recently quoted a report from JP Morgan which predicted that bitcoin could trade as high as USD146,000, if it becomes established as a safe haven asset.

He commented that it is hard to ignore the comparison between bitcoin and Gold. “As millennials become more prominent in the investment market, their preference for digital gold could cause a further increase in the price of bitcoin,” he said.

The JP Morgan survey quotes the fact that the US’s Grayscale Bitcoin Trust has seen USD3 billion of inflows, against recent USD7 billion in outflows from gold.

Grayscale has now launched its #DropGold Campaign. 

Meanwhile, the CFA Institute has published a paper on crypto currencies, written by Matt Hougan, chief investment officer for Bitwise Asset Management and David Lawant, a researcher at the company.

They write: “As the cryptomarket enters its second decade, one thing is clear: Crypto and blockchains are not going away. Today, cryptoassets boast a combined market cap in excess of USD350 billion; major financial institutions, such as Fidelity Investments and CME Group, are heavily involved; large endowments, such as those of Harvard University, Yale University, and Stanford University, are investing, alongside such hedge fund legends as Paul Tudor Jones II; the crypto efforts of leading companies, such as Facebook, PayPal, Visa, and Square, are frontpage news; and central banks, from the US Federal Reserve to the People’s Bank of China, are discussing how to develop blockchain enabled digital currencies of their own. Despite all the excitement, however, significant challenges remain for investors approaching the market.”

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