Fidelity Investments is now offering Bitcoin Exchange-Traded Notes (ETN) trading to its customers. This marks the first opportunity for U.S. investors to gain exposure to a cryptocurrency exchange-traded product.


About XBT Bitcoin ETN

One of the biggest news in August so far was the announcement that U.S. investors now had access to XBT Provider’s Bitcoin ETN product. Before the announcement, the BTC ETN was only available in the European market. Earlier in the year, noted EU speed trader Flow Traders NV began listing the ETN.

The Bitcoin ETN is listed under the market ticker CXBTF. XBT buys and holds the asset (BTC), which means every ETN trade becomes an indirect purchase of BTC. However, the trade comes without any exposure to the attendant volatility risk. XBT has more than $400 million in assets under management, out of which about 75 percent of it is in BTC.

CXBTF

ETN: An ETF Soft Option

For institutional investors, the news might come as a pleasant surprise given the similarities between ETNs and ETFs. With the reticence of the United States Securities and Exchange Commission to approve any Bitcoin ETF filing, the XBT BTC ETN represents a so-called “soft option.”

According to XBT Provider:

Bitcoin is purchased for money received through the sale of certificates which ensures that the certificates are hedged and structured to follow the price of bitcoin. The certificates are guaranteed by Global Advisors (Jersey) Limited.

Furthermore, the Bitcoin ETN is a security, which means it might likely catch the attention of pension funds and other institutional investors who are mandated by law to have 90 percent of their investments in securities.

The Quest for a Bitcoin ETF

While the XBT Bitcoin ETN provides another entry point for institutional money into the cryptocurrency space, the debate over ETFs continues to persist. The SEC has so far either denied or delayed the various filings brought before it.

For their part, the SEC remains uncomfortable with a few issues in the industry that they feel scuttle the potential for an approved ETF. Most of the problems revolve around liquidity, price manipulation, and robust custody solutions.

The consensus is that an SEC-approved BTC ETF in 2018 is highly unlikely. Many experts believe not a lot has been done to solve these problems.

What do you think about the XBT BTC ETN? Do you believe the market is ready for a BTC ETF? Let us know your views in the comment section below.


Images courtesy of Bloomberg and Shutterstock.

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