Financial disruption from the inside
Regulation makes it impossible today for most institutional investors to invest in Bitcoin. However, there are many new players trying to circumvent regulatory boundaries, or innovate from inside, instead of trying to change the regulations altogether. Innovation, instead of regulatory change, is a faster, cheaper and easier approach to change in many innovators' and entrepreneurs' eyes.
One of those companies is XBT Provider. In May, it launched the world’s first Bitcoin-based asset “Bitcoin Tracker One” and just recently announced its second product, a Euro-denominated Bitcoin-based security, Bitcoin Tracker EUR, available through Nasdaq Nordic on October 5.
"We are proud to offer a Euro-denominated instrument to meet demand from investors worldwide,” said Alexander Marsh, CEO of XBT Provider.
The demand for Bitcoin has seen very high growth since its inception in 2009 but this demand has been accessible only for private individuals or investors who have had the flexibility to invest outside of regulated exchanges. Looking at the demand from institutional investors, this might rapidly be changing and, according to Marsh, “Bitcoin Tracker One has during periods been among the top three most-traded ETNs on Nasdaq Nordic since launch.”
Attractive investment to diversify portfolio
Through the opening of Bitcoin-based assets accessible on the regular stock exchange, XBT Provider is looking to get institutional investors to understand the benefit of having Bitcoin in their portfolios, but more education is needed. “One of the advantages of diversifying your portfolio with bitcoin is that it’s still uncorrelated with other assets.” Johan Wattenström, Partner at XBT Provider explains. “Additionally, a critical number of triggers and catalysts in the Bitcoin ecosystem are now in place for a further take-off in the price.”
The volatility that has followed Bitcoin has been seen as both a blessing and a curse. For the regular investor, volatility in an asset is often seen as something negative that has to be avoided to have a stable portfolio. However, volatility for the institutional investors, and crafty traders, is instead seen as something very positive since they can capture the upward price movements and make a profit from them.
Bitcoin no longer an untouchable asset
There are a few benefits for investors to invest in ETNs instead of directly in the underlying asset or in an ETF. First, ETNs can track one unique asset without needing to diversify its holdings such as an ETF often must. Additionally, it can increase liquidity in otherwise highly illiquid assets. Lastly, it can give investors access to assets that are otherwise too hard to manage or require too much prior knowledge to maintain properly.
This makes ETNs a very common choice for investors who would like to invest in niche assets without needing to spend time and resources learning and understanding the underlying asset's technical aspects.
From Sweden to the world
Bitcoin Tracker One is denominated in Swedish krona, which, being a minor currency in the global financial markets, has led to some still being hesitant to invest. Bitcoin Tracker EUR aims at changing this by making the steps for investing in bitcoin as few as possible. Being denominated in euros, it can lower fees and make bitcoin much more accessible to the global investor.
Compared to bitcoin, Bitcoin Tracker One has seen incredible growth since its launch a few months ago and is currently holding more than 15,000 bitcoin. This opens up the question whether the next step to Bitcoin’s growth will come from the institutional side and not from the private investor. Additionally, it has followed the price of bitcoin on a 1:1 ratio consistently, which shows that, if managed properly, bitcoin can be considered as any other financial asset that institutional investors could consider investing in.
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