Single Post

Will Crypto ETP Fast-Track The Emergence Of A Bitcoin ETF?

The possibility of having an SEC-approved Bitcoin ETF was one of the major highlights of 2018 as the crypto space took a step closer to the mainstream adoption. However, it was the introduction of an ETP in Switzerland that remarkably put crypto back on the spotlight after months of lows, especially in the crypto market.

The major stock exchange in Switzerland, SIX Swiss Exchange, took a bold step to approve Amun AG’s exchange-traded products back in November that would track a total of five digital assets which include Bitcoin, XRP, Ethereuem, Litecoin and Bitcoin Cash. In the grand scheme of things, this development promises to allow retail traders and institutional investors indirectly trade crypto without having to worry about the custodial risks that come with it.  

Interestingly enough, a handful of columnists and market watchers opted to use the tag ETF for Switzerland’s newly established crypto ETP. In a way, this has contributed to the fogginess of the true nature of the product and how it differs from an ETF. As expected, the crypto community is yet to fully grasp the complexity of the situation and how a startup could seamlessly have its product introduced in a major stock exchange in Europe while powerhouses are finding it difficult in the US market.

Judging from the definition of an ETP, an ETF is one of the various forms of an ETP. Therefore,  if we take a broader look at the technicalities of the two concepts it is not fallacious to refer to a crypto ETP as a Crypto ETF. However, one thing that sets these two apart is their functionalities. An ETF is more stable and unsusceptible to the risk that is associated with a majority of investment vehicles. As such, ETFs are more popular, especially to investors that prefer low-risk investments.

In contrast, an ETP is less stable and companies that are willing to introduce a crypto ETP are not required under the law to prove the stability of the crypto futures market. This is one of the major reasons why a majority of the applications before SEC has failed to impress regulators as none has successfully proven that the crypto market is stable. This coupled with the fact that the Bitcoin futures market is of insignificant size is a major stumbling block for the approval of a Bitcoin ETF.

Also, there is an ongoing debate between SEC and applicants that the crypto market is susceptible to various forms of manipulations as whales continue to have immeasurable influence over the crypto market trends. Therefore, the unavailability of a system that will ensure that manipulation does not exist is also a recurring issue that jeopardized the chances of having a Bitcoin ETF in 2018. Another issue that has come to the fore is the unavailability of regulated crypto custodial services.

Crypto ETP and Bitcoin ETF

To experts, the introduction of a Bitcoin ETF in a market as big as that of the US will advertently launch crypto to mainstream status. However, a careful assessment of the situation elevates Amun’s crypto ETP to almost the same significance as that of a Bitcoin ETF, even though there are similar ETPs that already exist in Sweden and the US. This is true if we consider the fact the ETP has effectively introduced a basket of digital assets that allows traders and investors spread their fund across five different assets.

Since SIX Swiss Exchange is the main stock exchange in Switzerland and the fourth largest in Europe, it is certain that the development will have a ripple effect in the crypto market. An exchange that is worth $1.6 trillion will effectively drive the introduction of institutional investors and make it more impossible for the so-called whales to have unbridled power over the crypto market. In essence, this will put to rest the notion that the crypto market is susceptible to manipulations.

Also, the success of the crypto ETP will rub off on SEC’s decision on VanEck SolidX physically backed Bitcoin ETF proposal. Already, there is a lot of controversy surrounding SEC’s previous decisions as a commissioner of the body has openly criticized its rigid nature and the crypto community perceives that regulators in the US are less receptive of innovations. it is probable that SEC will want to make a statement that shows that its previous decisions were not bias and its decision to re-examined rejected applications proves that the regulator is on the path to establishing itself has an inclusive arm of the government.

The Bottom Line

The introduction of crypto ETP in new regions and the success of existing ones reaffirm the viability of the crypto as a form of investment. Therefore, an economy as big as that of the US needs a crypto ETF in order to tap into the immense investment opportunities that come with crypto.

Scroll to top