With cryptocurrency markets appearing to slowly be regaining some of their former vitality, it makes sense that Sweden-based XBT Provider—which has already listed exchange traded products (ETPs) tracking Bitcoin and Ether in Europe—just launched two more ETPs on the Nordic Growth Market, a subsidiary of the Boerse Stuttgart. The derivatives, one tracking XRP (formerly Ripple), the other Litecoin, began trading on April 5.
Earlier this year Switzerland-based Amun introduced a similar product, the Amun Crypto Basket Index (SIX:HODL).
To date, all told, XBT Provider has issued eight such products, all available via European exchanges. Has demand been robust for these derivatives?
That depends on your metrics. The first four ETP launches offered exposure to Bitcoin (BTC) and Ether (ETH) the most popular and second most popular cryptocurrencies respectively, by market cap. Demand for these products—Bitcoin Tracker One (ST:SE0007126024), Bitcoin Tracker EUR (ST:SE0007525332), Ether Tracker One (ST:SE0010296574) and Ether Tracker Euro (ST:SE0010296582)—has been stable.
According to XTP Provider stats, between March 1, 2018 to March 31, 2019 the volume on the BTC products was at €833.6 million ($942.93 million), while the volume on the ETH products was at €567.5 million ($641.93 million). Laurent Kssis, managing director of XBT Provider by CoinShares, commenting on the numbers, says demand for the BTC and ETH tracking ETPs has been “healthy” over the last year, given investors have been trading a combined $1.5 billion worth of the Ether and Bitcoin ETPs on NASDAQ Stockholm.
During this same period the group saw over $90 million invested in the ETPs, about 60% of that invested in the ETH tracking products, 40% BTC. Says Kssis:
“The support we have seen from investors in Europe and especially the Nordics, even in the face of a bearish crypto-asset market in 2018, leads us to believe we will continue to see healthy volume in both our ether and bitcoin ETPs as well as in the new XRP and Litecoin ETPs.”
ETPs Not a Barometer for Overall Demand
Industry observers are more cautious in assessing results. Vaibhav Kadikar, founder of CloseCross, a decentralized prediction market platform, says factors—such as younger investors, in particular, the transformative power of the underlying technology powering cryptocurrencies, as well as the potential economic gains through exposure to the asset class—are beginning to look increasingly attractive. However, he adds:
“Despite all this, ETP demand, in general, should not be looked at as a barometer of general demand for crypto or for any potential future ETFs. In spite of their advantages, direct crypto investments and institutional ETF investors may not find the sweet spot they expect in ETPs.”
Still, these latest launches are being met with optimism.
Armin Schmid, CEO of Swiss Crypto Tokens, part of the Bitcoin Suisse Group, notes that the news that XRP and LTC ETPs have gone live on the Nordic Growth Market is a positive step toward bridging the gap between traditional financial instruments and the new crypto space.
“Diverse trading options are important for the growth of the space and ETPs are another investment route for both traditional and crypto investors. The increasing diversity of financial instruments available in the crypto-finance environment is indicative of the industry’s new phase of maturity.”
In light of the recent decision by the Chicago Board Options Exchange (Cboe) to suspend Bitcoin futures trading on their exchange, “we have yet to prove [that] any of these new products will have any longevity,” said Alex Mashinsky, founder of Celsius Network.
It's optimistic news to find continued interest in complex financial instruments and products in the crypto space, notes Robert Viglione, president of Horizen, a privacy oriented cryptocurrency and technology platform, after the Cboe suspension. “This launch also indicates the strength and resiliency of crypto markets, as well as a desire among investors for a diverse array of product offerings,” he says.
Some see even broader implications. Jae Choi, CEO of crowdfunding site Pledgecamp, believes the launch of ETPs indicates there's interest from a broad array of individuals. From family offices to institutional investors there's appetite to invest in cryptocurrency, which is now being seen as an asset class rather than a purely speculative play, he points out, which was the case back in 2017.
“This will have ripple effects for other countries and exchanges, while triggering financial firms to create and package similar products. This type of movement gives further confidence for countries such as the Korean government to, for instance, de-regulate its cryptocurrency ban. Buying pressure may rise, which correlates to another bull market.”