Exchange Traded Notes Allow Investors with Dollars into the Market
In late August 2018, American investors will be able to purchase a Bitcoin exchange-traded-note which seeks to allow some of the more timid investors an opportunity to own the digital currency.
The product is called Bitcoin Tracker One, and it is now listed in U.S. dollars under CXBTF which allows brokerages to offer it to American investors. While this is not the ETF decision that the marketplace has been waiting for, it will enable investors to purchase Bitcoin as a financial product listed and regulated in Sweden.
The ETF Game
While the crypto-ETF has been consistently stopped by the Securities and Exchange Commission due to concerns about fraud and manipulation, this offering may be enough to attract timid investors who are interested in owning some stake in cryptocurrencies.
Bitcoin Tracker One is akin to purchasing an American depositary receipt, meaning traders can see it as a foreign-listed asset in U.S. dollars. All the trades are executed in dollars while being held in custody in home markets, as stated by the OTC Markets Group.
ETNs vs ETFs
Exchange-traded notes (ETNs) are different than exchange traded funds. ETNs are debt tools which are backed by issuers rather than a asset pools. They focus on investment strategies that don’t fit squarely into a fund. Currently, only Grayscale’s Bitcoin Investment Trust offers a publicly traded financial vehicle which gives exposure to Bitcoin.
The rising strength of the dollar is applying downward pressure to cryptocurrencies, with money flowing out of cryptocurrencies like Bitcoin. This is largely because they have been seen to be in an recession or in an outright speculative bubble.
New Product for Old money
While the SEC hesitates on accepting Bitcoin backed ETFs, it appears that market demand is looking for other financial tools which allow some exposure to cryptocurrencies. ETNs may be the tool that investors are looking for. Bitcoin Tracker One will soon be made available for people in the American market. Yet, with a strong dollar, products like this will have to make a compelling case to consumers in order to circumvent their fears about the increasing sell off of cryptocurrencies.