The world’s first fully-regulated crypto ETP (exchange-traded product) will launch in Switzerland this week, allowing people to trade a basket of cryptocurrencies including bitcoin, ethereum, XRP, bitcoin cash, and litecoin.
It’s important to point out that, contrary to some misleading news reports, this is not the much-hyped bitcoin ETF (exchange-traded fund).
The cryptoverse is eagerly awaiting the approval of a bitcoin ETF, with many calling it the future catalyst for a bitcoin price surge. But how is this Swiss crypto ETP different? And what exactly do you need to know?
What is a Crypto ETP?
An ETP is an acronym for “exchange-traded product.”
In simple terms, an ETP tracks the price of an underlying asset (or a basket of assets), like gold, stocks, and now cryptocurrencies.
The beauty of ETPs is that they are simple and cheap. With this new ETP, investors don’t need to buy cryptocurrencies directly or figure out how to store them. They simply buy the ETP from their broker and instantly get exposure to a basket of five cryptocurrencies.
The ETP is traded on the Swiss stock exchange and can be bought through a traditional stockbroker.
In essence, they’re more accessible to institutional investors which may lead to more money flowing into the crypto market.
Sounds a Lot like an ETF…
It is. The difference is that “ETP” is an umbrella term for different types of exchange-traded products. Those products include ETFs.
ETFs are the most popular type of ETP, but there are others, including exchange-traded notes (ETN) and exchange-traded vehicles (ETFV).
Further reading: What is a Bitcoin ETF? (And Will It Trigger a Price Surge?)
Swiss Crypto ETP Launches This Week
The Amun Crypto ETP will begin trading this week on the Six exchange. It will track a basket of five cryptocurrencies, weighted heavily to bitcoin and XRP. The exact makeup of the ETP is listed below:
Bitcoin Cash: 5.2%
It’s interesting to note that XRP receives a significantly higher weighting compared to ethereum. Although XRP overtook ethereum as the second-largest cryptocurrency last week, the heavier weighting may be an indication of Amun’s expectations for the future.
Note: the weighting will be rebalanced automatically on a monthly basis.
Amun notes that it aims to provide a diverse holding of crypto assets. However, it removes any assets that are tied to a fiat currency, like tether, and any currencies with anonymity features (such as zcash and monero).
The Amun Crypto ETP also avoid any coins without sufficient liquidity and those that don’t trade on reputable exchanges.
Speaking to the Financial Times, Amun CEO Hany Rashwan said:
“The Amun ETP will give institutional investors that are restricted to investing only in securities or do not want to set up custody for digital assets exposure to cryptocurrencies. It will also provide access for retail investors that currently have no access to crypto exchanges due to local regulatory impediments.”
The ETP carries a management fee of 2.5% annually.
Jane Street and Flow Traders will back the fund and have agreed to pour money into the ETP to give it liquidity. They are known as “market makers.”
In true cryptocurrency style, the ETP will trade under the ticker $hodl. It’s a nod to the popular crypto meme “hodl,” a misspelling of “hold” which was adopted by crypto enthusiasts as a term for holding bitcoin even through the biggest price drops.
It launches on the Swiss SIX exchange, the fourth-largest stock exchange in the world. Based in Zurich, it has a market capitalization of $1.6 trillion.
Swiss Stock Exchange: Bullish on Crypto?
This isn’t SIX’s first foray into the cryptocurrency world. In July 2018, SIX announced plans to launch a fully-regulated crypto exchange, overseen by Swiss banks and regulators.
At the time, SIX CEO said: “For us, it is abundantly clear that much of what is going on in the digital space is here to stay and will define the future of our industry.”
Set to launch in 2019, the exchange will facilitate trading, settlement and storage custody services.
How Is This Different to the Anticipated Bitcoin Etf?
First, there’s the makeup of the ETF itself. The Amun Crypto ETP tracks a basket of cryptocurrencies, rather than purely bitcoin.
Secondly, there’s the scale and impact of the ETP. While the Swiss ETP is an important first step, launching an ETF in the US is a much bigger beast.
The size of the exchange is the first point of difference. The Swiss exchange has a market capitalization of $1.6 trillion, compared to the New York Stock Exchange’s $21.3 trillion and the Nasdaq’s $7.8 trillion.
Simply put, launching a bitcoin ETF on one of the major US exchanges would have a much larger impact.
Then there’s the regulatory process. Switzerland, as explained, is much more open to the crypto industry in general. Approval in Switzerland is less of a groundbreaking move. Whereas the approval of a bitcoin ETF in the US would break down the door for countless other cryptocurrency products and investment vehicles.
The Securities and Exchange Commission (SEC) faces a deadline of December 29th to rule on the next bitcoin ETF proposal put forth by VanEck. However, there’s a good chance the SEC will push the decision back into 2019.
Commentators expect a bitcoin ETF approval to kickstart a new bitcoin price surge. It would, theoretically, allow institutional investors to flood into the market.
Currently, many Wall Street traders are forbidden to buy or hold cryptocurrencies as part of their client portfolios. Others are worried about the risk involved with buying and storing so much crypto directly.
A bitcoin ETF would give them an easier way to gain exposure to the crypto market, without the risk and complexity of buying it directly.
The Swiss crypto ETP is an impressive and important milestone in crypto adoption. It provides a simple route for institutional investors to wade into the crypto market. However, this is not the catalyst many are waiting for, and it does not make a bitcoin ETF approval in the US any more likely.
As always, Block Explorer will bring you more information as and when the true bitcoin ETF is approved in the US.