Bitcoin has unveiled its own alternative to the exchange traded fund (ETF) for the United States, called a Bitcoin Exchange Traded Note (ETN).
While the US still does not have access to a Bitcoin ETF, this will hopefully satisfy investors wants for an alternative and perhaps lead into a Bitcoin ETF for the United States and its thousands of investors. Under the ticker CXBTF, Bitcoin Tracker One (SEK) is listed and regulated Sweden and is now also being quoted in the United States with US dollars, acting as an open-end unsecured debt note unlike a regular ETF.
United States regulators have prevented an actual Bitcoin ETF from being released for several months, largely due to concerns about liquidity and manipulation. Regardless of the obstacles, the release of the Bitcoin ETN acts as a soft opening towards the eventual approval of the Bitcoin ETF.
Background of Bitcoin Tracker One
Bitcoin Tracker One, released in 2015 in Sweden’s capital of Stockholm, was the first bitcoin-based security on the NASDAQ/OMX regulated exchange. The tracker synthetically tracks the performance of BTC on the market for no fee, providing exposure through the non-equity linked certificate securities. These securities are traded like any other instrument on the NASDAQ exchange located in Sweden, Europe, and now the United States.
Bitcoin Tracker One has unfortunately sank by 51% in 2018 following the wide-scale collapse of many major cryptocurrencies’ prices, though Bitcoin Tracker One has managed to avoid total price collapse amid the current bear trend in the market.
CoinShares Holdings is the parent company of the ETN, where Ryan Radloff noted that this is a huge step towards accessibility for Bitcoin and to gain exposure for these previously region-locked (euros and kronas) products. The release of the ETN has resulted in a large flow of investments from United States traders who have anticipated the release for several months.
23/ So while institutional access is great, we suspect retail demand will continue driving the market in the mid-term, albeit through bigger "institutional-sized plumbing."
in other words… INCREASING ACCESS IS THE GOOD NEWS!!!
— Ryan Radloff 👩🚀 (@RyanRadloff) August 17, 2018
Possibility of a United States ETF
As the exchange traded note is gradually spreading in adoption across the States, it will likely influence the United States Securities and Exchange Commision (SEC) to make a decision in favor of a Bitcoin-based exchange traded fund.
The decision, however, has been postponed to September 30 at the earliest. This has been the trend for recent SEC decisions for approval of the ETF for much of this year, gaining little progress towards any approval let alone a decision for or against a BTC exchange traded fund. Further delays are projected, with the SEC stating it has seen only two comments on the ETF proposal despite much of the cryptocurrency community’s excitement and anticipation for the proposal.
Critics of the Bitcoin ETN, preferring the commodity-backed exchange traded funds, are worried about the higher credit risk posed to investors of an exchange traded note over than an ETF, being one of the two major differences between an ETN and ETF. This credit risk is generated by the fact that investors do not actually control the assets that they are trading and that if the institution for the ETN could go bankrupt, causing the investor to lose the affected assets.
The second difference is taxation, where ETNs are subject to greater long-term gains in the capital since only the difference between the price at sale and purchase is taxable. ETFs are subject to much greater taxation since within the fund the ETF directly buys and sells assets and thus creates short term capital gain taxes, which are placed at a much higher tax rate than the ETN.
Several other cryptocurrencies are likely to assemble in favor behind the decision for a US-based Bitcoin ETF despite the critics and postponements, however it might lead to a large selloff and delay. Several key investors have noted that 2019 is the time to anticipate the ETF decision rather than this September.