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Bitcoin Fund lessons from Sweden- and What the USA can learn from it?


Jan 19, 2018 Posted /  9879 Views


Bitcoin Fund lessons from Sweden- and What the USA can learn from it?

If the citizens of The States are tired of hearing, “ learn from the Scandinavians” now there is another rhetoric for you, “Learn from Swedish.” A Swedish firm has apparently found the much-needed solution for bringing bitcoin exchange-traded finances to the market. Until now, the Securities and Exchange Commission (SEC) had not been able to conclude on this matter and as a matter of fact, 4 prospective bitcoin ETF issuers withdrew their filings for new funds last week. The ETF issuers disclosed their concerns pertaining to trading liquidity and valuation of bitcoin Futures as they tracked the Bitcoin funds after SEC withheld them of any help.

However, a Stockholm-based company, XBT Providers is successfully running a bitcoin exchange-traded product from last two years.  European investors in countries across the world have attested this product as it has attracted more than $1 billion. The company launched its CoinShares series back in 2015 and two trackers were started on the Nasdaq Stockholm. XBT Bitcoin Tracker One (COINXBE) is for Swedish Krona and XBT Bitcoin Tracker Euro (COINXBE) for Euro. XBT also launched versions in Denmark, Finland, Estonia and Latvia. In the Swedish krona version, 200 shares are equivalent to the price of one bitcoin, and in the euro version 20 shares equivalent to the price of one bitcoin.

However, a major difference in the thought process of the USA and Sweden company exchange-trade is the type of product. While the XBT owned one is an exchange-traded note (ETN) and not exchange-traded funds. If we talk about ETN- it is an unsecured debt mechanism that guarantees to compensate the pattern of returns of the bitcoin price. Paradoxically, even if it is an unsecured instrument, the XBT product tracks the spot price of bitcoin by withholding the actual currency and forward contracts in case of a liquidity shortfall. Laurent Kssis, chief executive officer of XBT Provider says that

"At that point in time, the ETN structure was the best route to bring the products to market. As a result of using this structure to bring the product to market, investors have been able to gain exposure to the price movement of bitcoin since 2015. This stands opposed to the U.S., where most investors are still waiting for access to bitcoin exposure via their normal brokerage account."

The three-pointers for building a Bitcoin Portfolio

The experts suggest three different mechanisms to create a bitcoin exchange-traded product. It could design an exchange-traded fund that owns and stores real bitcoins, comparable to the SPDR Gold Shares ETF (GLD). GLD tracks the spot price of gold by holding physical gold bricks in bank vaults in London. The second way is a bitcoin futures ETF, which evaluates the price of bitcoin by possessing bitcoin futures products. This particular product has been the leading archetype for SEC filings, together with the ones that have been recently pulled.

In October 2017 XBT introduced two more ETPs to track Ether, in both Swedish krona and euros and now these also are listed on the Nasdaq Stockholm for European investors. One ETF Company, which filed for a bitcoin ETF is analyzing the ETN route and have remarked that others have been talking about it as well.

Garrett Stevens, the chief executive officer of Exchange Traded Concepts, which worked with REX ETF on a rejected bitcoin futures fund, mentioned that "We have considered notes with regards to bitcoin, but we have not had the opportunity.” He further added "But we are a white-label company and we do what someone else wants. That's what the REX guys wanted, so that's what we created. I don't know why an ETN hasn't been done yet. We know other people are in discussions to make one, but it's not us. We know it's being talked about."

There is one product that at present gives U.S. investors access to the bitcoin market, which is the Bitcoin Investment Trust (GBTC). The product managed by Grayscale Investments is not an ETF  (not SEC-acknowledged) and trades on the Nasdaq over-the-counter markets. It's extremely volatile and can trade at an ultimate premium to the value of bitcoin.

As trading is done on an exchange, products like ETFs and ETNs are not valued using a net asset value (NAV). There is also a present market price that sums up of more of a premium or less of a discount to the original price. The more volatile a market, the more likely there is to be a premium/discount issue.


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Tags: bitcoin bitcoin exchange Bitcoin Fund

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