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Tuesday, June 11, 2024
HomeCryptoUK Bitcoin and Ethereum ETN record low volume

UK Bitcoin and Ethereum ETN record low volume

The UK’s Bitcoin and Ethereum ETN* recorded low trading volumes since launching on the London Stock Exchange (LSE) on May 28 following approval by the country’s financial regulator is the Financial Conduct Authority.

According to one of the issuers, 21Shares, unlike US exchange-traded funds (ETFs), only professional investors will be allowed to trade the product and the opening to the retail market will be “game changer”.

21Shares offers 4 Bitcoin-backed cross-listed products and 4 ETH-backed products in the UK. WisdomTree manages 2 Bitcoin ETNs and 2 Ethereum ETNs, and Invesco also offers 2 Bitcoin-backed products. To be listed on the LSE, a cryptocurrency ETN must be physically backed, have no leverage, and only offer the ability to invest in Bitcoin or ETH.

Since launch, total revenue for all products combined was just $504,880 as of June 6, with WisdomTree accounting for 59% of trading volume and 21Shares accounting for 41%. According to data from 21Shares, Invesco products have so far seen zero trading volume. Meanwhile, according to the data, spot Bitcoin ETFs in the United States have seen trading volume worth $2.5 billion on Friday alone.

Source: Yahoo Finance, The Block

To date, WisdomTree’s four UK cryptocurrency products have seen comparable trading volumes. However, among 21Shares products, Ethereum products are more successful, accounting for 76% of trading volume. Among them, 21Shares’ Ethereum Staking ETP has achieved a trading volume about 57% higher than the Core Ethereum product without staking profits.

According to the data provided, in terms of average daily spreads, 21Shares products maintain the tightest of any crypto ETN on the LSE. Spread refers to the average difference between the bid (buy) price and ask (sell) price of an ETN over a trading day — an important measure related to the transaction costs and liquidity of the product being traded. provide.

The LSE is not the only trading venue

21Shares notes that professional traders often trade OTC, buying and selling financial instruments directly with a party other than official exchanges such as the LSE or through the most liquid exchange available.

Although the FCA opening up the UK market to professional investors is a “huge step in the right direction”, as these are also cross-listed products, meaning listed financial instruments and trade on multiple exchanges in different countries or regions. Low trading volumes were “in line with expectations”, as Alex Pollak – Director of 21Shares UK shared.

“Professional investors will trade on the most liquid markets – by far Deutsche Börse Xetra,” Pollak said. Xetra is the reference market for exchange trading of German equities and European ETPs. 21Shares first started launching the above cryptocurrency ETP Xetra in July 2020.

However, the “stamp of approval” from the FCA and LSE means that many Wealth and Private Banking platforms are now actively considering how they can offer or add Bitcoin or ETH allocations to professional client portfolios, Pollak said. added:

“We do expect to see more trading volume once the platforms complete their onboarding process. We still believe that FCA approval for professional investors in the UK is a really important step for this asset class and we look forward to the market opening up to retail in some time in the future – that would be a more “game-changing” moment.”

Other crypto regulators agree

Michael Delew, Director of Capital Markets at WisdomTree, said the low volume is not surprising as the products are only intended for professional and institutional investors.

“These cross-listed products have very few initial transactions. UK-based institutional investors can already access physically-backed crypto ETPs on other European exchanges and OTC markets, where they have been available since 2019 and has good daily trading volume.”

Echoing Pollak’s views, Delew agrees this development represents a significant step forward in the legalization and suitability of the asset class for UK investors and FCA approval can lead to greater organizational adoption over time, removing regulatory barriers and uncertainties.

“Access to public listing on a regulated market approved by the UK regulator, ease of trading, transparency and 100% institutional-grade crypto ETP support The physical aspect is attracting more and more investors’ attention.”

James Butterfill, Head of Research at asset management firm CoinShares, said:

“These numbers are low for many reasons. Firstly, the minimum investment amount is very high to avoid retail investors. UK listed products are therefore missing out on a huge opportunity, but these are rules set by the FCA, as they believe retail is not sophisticated enough to invest in.

Second, the understanding of institutional investors in the UK is very low compared to the rest of Europe, for which reason they have chosen not to invest or would have invested in European ETPs bigger, more liquid”.

CoinShares offers exchange-traded products (ETPs) in Europe but is not currently available in the UK.

The legal landscape in the UK

The FCA has taken a cautious stance towards the cryptocurrency space in an effort to ensure investor protection while trying to promote innovation. In 2021, the FCA banned the sale of derivatives and ETPs to retail investors. However, the UK’s stance on cryptocurrency regulation has since changed.

The statement from the FCA in March showed for the first time that it was willing not to block crypto ETN requests for professional investors. LSE then announced plans to begin accepting Bitcoin and Ethereum ETN applications in Q2, with cryptocurrency ETN trading starting on May 28. These products provide exposure to the price movements of Bitcoin and ETH, albeit through a slightly different financial structure than a direct ETF.

ETNs do not directly own the underlying assets they represent, unlike US Bitcoin spot ETFs. Instead, an ETN is a debt security issued by a financial institution that promises to pay holders a return equal to the performance of an asset, minus fees and expenses.

Bitcoin ETF possible appeared in UK?

Currently, UK retail investors also face barriers preventing them from investing directly in US Bitcoin spot ETFs. The main challenge lies in the legal framework governing securities in both countries, which is not always suitable for cross-border investments.

Coinbase UK CEO Daniel Seifert recently said that the availability of ETNs is a positive step forward for the UK. When asked if Daniel Seifert would like to see a Bitcoin ETF available in the UK, Seifert replied:

“I think having more choices for users is always a good thing.”

Kraken UK Managing Director, Bivu Das, is also among those optimistic about the potential of Bitcoin ETFs in the UK, emphasizing the importance of these financial products in providing opportunities Managed investments for a wider audience.

In March, Das explained that the world has changed significantly since such products were restricted in the UK in 2021.

“The UK has always said it wants to be a crypto hub. And this is one of the fundamentals that potentially meets that definition,” Das added.

*Cryptocurrency exchange-traded notes (ETNs) are financial products issued on exchanges and related to crypto assets such as Bitcoin, Ethereum, or other cryptocurrencies. Just like traditional ETNs, cryptocurrency ETNs are also financial instruments that investors can buy and sell on exchanges. However, the main difference between crypto ETNs and other ETNs is that their underlying asset is cryptocurrency instead of traditional assets like stocks or commodities.

Minh Anh

According to The Block

Mark Tyson
Mark Tyson
Freelance News Writer. Always interested in the way in which technology can change people's lives, and that is why I also advise individuals and companies when it comes to adopting all the advances in Apple devices and services.


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