What Is Bitcoin Exchange Traded Crypto and What Impact Could It Have?
On June 18, ETC Group and HANetf announced the listing of a new exchange-traded bitcoin investment vehicle – named Bitcoin Exchange Traded Crypto (BTCE) – on the Germany-based Xetra exchange.
But what exactly is BTCE?
And what potential impact could this new exchange-traded product have on the wider crypto market?
What Is BTCE?
In essence, BTCE is a new investment vehicle – akin to an exchange-traded fund (ETF). It tracks the price development of bitcoin (BTC) and claims to be the world’s first centrally cleared Bitcoin exchange-traded commodity (ETC).
The BTCE is 100% backed by “physical” bitcoin, trades on the Deutsche Börse’s Xetra exchange, and is denominated in euros.
It is also the first cryptocurrency ETC on HANetf’s white label exchange-traded product (ETP) platform, according to a press release shared by Xetra.
BitGo acts as the custodian for ETC Group and Deutsche Boerse’s Eurex Clearing service handles central clearing, which removes bilateral counterparty risk for BTCE investors.
ETC Group CEO Bradley Duke, said,
“BTCE brings the transparency and investor protection that regulators and institutional investors require to the world of bitcoin. Investors get the benefits of trading and owning bitcoin through a regulated security, while having the optionality of redeeming bitcoin if they choose.”
Michael Krogmann, a board member of the Frankfurt Stock Exchange, stated,
“With the new product, investors can easily participate in the performance of the Bitcoin price without having to use unregulated crypto-trading platforms. Separate infrastructure, such as a crypto wallet, is not required.”
"With the world’s first centrally cleared bitcoin ETN, we are also setting new standards in the post-trade processing of products on cryptocurrencies.”
What Impact Can We Expect?
Those expecting a major splash in bitcoin prices following the announcement of the new BTCE product will have been disappointed, as the market was largely unmoved by the news. Some, however, expected no less.
While the BTCE is effectively a bitcoin ETF, it is primarily targeted at retail investors and is currently only available in Germany, Austria, Italy and the United Kingdom.
That means larger Wall Street investment firms that would be expected to pile into a United States-based Bitcoin ETF (and thus drive up the price of bitcoin), will not be investing in the Xetra-listed BTCE.
While the United Kingdom and Germany have substantial retail investor bases, many investors in both nations already have direct exposure to bitcoin. And buying bitcoin through a bitcoin app is, generally speaking, easier than signing up for an online brokerage account to buy securities.
The BTCE also comes with a 2% annual fee, which makes it more expensive to hold exchange-traded bitcoin than physical bitcoin.
However, in exchange for that fee, investors do get a lot of benefits. For a start, they do not need to manage their own private keys or handle any of the other technical aspects typically associated with buying and storing bitcoin.
Additionally, the BTCE is regulated and centrally cleared, which reduces the risk of losing money due to outside factors, such as exchange hacks or counterparty disruptions.
Therefore, we will likely see demand for this new bitcoin product rise.
That said, at this stage, there is unlikely to be enough interest in the product to move BTC prices in any meaningful way. Regardless, if more products like this were to roll out elsewhere, that could change quickly.