The cryptocurrency exchange-traded product (ETP) panorama is hotting up in Europe with extra methods coming to market in current months, nevertheless, the divergence between European regulators is sending blended indicators to retail traders concerning the viability of digital belongings.
That is the third bitcoin ETP launch on the German exchange since regulator BaFin categorized digital belongings as monetary devices somewhat like stocks or bonds at first of this 12 months.
On the time the German regulator stated digital belongings are “a representation of a value that has not been issued or guaranteed by any central bank or public body and is not necessarily linked to a currency specified by law and that does not have the legal status of a currency or money, but is accepted as a medium of exchange by natural or legal persons and can be transmitted, stored and traded electronically”.
Together with the Deutsche Boerse, the SIX Swiss Alternate has additionally attracted quite a few crypto ETP listings over the previous two years.
The SIX Swiss noticed the launch of the world’s first crypto ETP, the 21Shares Crypto Basket Index ETP (HODL), on its exchange following approval from the Swiss Monetary Market Supervisory Authority (FINMA) in November 2018.
With regulators on two of Europe’s main exchanges taking a optimistic view on cryptocurrencies, traders have slowly began growing their publicity to bitcoin ETPs.
Highlighting this, ETC Group’s BTCand so on Alternate Traded Bitcoin ETC (BTCE) handed the $100m belongings below administration (AUM) mark earlier this month whereas specialist crypto ETP issuer 21Shares has reached $150m AUM throughout its 11-strong vary.
Institutional traders have additionally began to extend their publicity to cryptocurrencies amid the low yield surroundings and more and more correlated returns of bonds and equities.
MicroStrategy, for instance, holds slightly below $600m belongings in cryptos with CEO Michael Saylor stating every public dedication to bitcoin is the following catalyst for extra wider adoption.
Nonetheless, in contrast to BaFin and FINMA, the UK’s watchdog, the Monetary Conduct Authority (FCA), has taken an especially adverse view on crypto belongings.
Final month, the FCA made the choice to ban the sale of crypto derivatives, together with ETNs to retail traders ranging from January 2021.
The explanation for this, the UK regulator stated, is as a result of they’re “ill-suited” for retail traders citing price volatility and lack of true value.
Sheldon Mills, interim government director of technique and competitors on the FCA, stated: “This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here.”
The divergence between regulators’ views throughout main European markets is sending blended indicators to traders concerning the crypto panorama.
The volatility within the bitcoin price, as highlighted by its sharp rise to $19,500 in a month after which drop to under $17,000 in below a week, leaves many skilled traders nonetheless sceptical concerning the lack of intrinsic value behind the varied cash.
As Mark Northway, funding supervisor at Sparrows Capital, instructed ETF Stream: “An asset or a threat class doesn’t grow to be investible just because the market has hooked up a price to it, as a result of funding is essentially about value.
“Without a linkage, however tenuous, to future cash flows or economic production, a risk class is necessarily relegated to the realms of speculation.”