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Cryptocurrency Derivatives Series: Wisdomtree Rolls-out Physically Backed Bitcoin ETP on Switzerland’s Stock Exchange

Wisdomtree Investments , which is New York based ETF provider has launched a new BTC-based exchange-traded product (ETP) in the name of ‘BTCW’ on Switzerland’s SIX stock exchange.

Well, amid the growing concern about bitcoin ETFs as SEC has been constantly declining its approval, the freshly introduced ETP product on bitcoin by WisdomTree would be quite unique from the other cryptocurrency ETPs traded on SIX, as the BTCW product would be physically backed by bitcoins held in storage. 

The ticker BTCW competes with seven other cryptocurrency ETPs available on SIX that essentially weighs a basket of digital assets or track the prices of single cryptocurrencies.

This (physical backed ETP) is not a new business for Wisdomtree, the company has already been in the ETF business close to two decades and has already launched physically backed gold back in 2003. 

Unlike other ETPs available on SIX, the latest investment vehicle will captivatingly facilitate investors to gain exposure to physically backed bitcoin ETP.

The prevailing downtrend in the cryptocurrencies may have caused blood bath for some traders in the recent past, while Bitcoin futures has coincided with the record volumes and simultaneously in the Bitcoin ETP trades on some Swiss Stock Exchanges, implying that institutional investors’ “buying the dip” approach.

We recently observed spiking volume in Swiss Bitcoin ETP. Bitcoin exchange-traded product (ETP) with the HODL ticker offered by Amun Crypto is also available for trading on Switzerland’s SIX Exchange which is cash-settled.

ETP represents an abundantly collateralized and non-interest-paying bearer debt security, which is issued as a security and traded and redeemed in the same structure.

Nevertheless, there has been a notable difference between an ETP and an ETF. The former is not subjected to the Collective Investment Schemes Act (CISA) and is, therefore, not supervised by FINMA.

While the International Central Securities Depository (ICSD) is going to take care of BTCW settlement and Wisdomtree strives to “offer liquidity like any other exchange-listed security.” Wisdomtree notes that bringing digital currencies to the ETP structure may bring the possibility of liquidity centralization, which in turn could “benefit the underlying digital asset.”

We came across how the lingering apprehensions about cryptocurrency pricing being led by a potential ETP when we look into the white paper titled Why Cryptocurrency ETPs May Be Good For Investors of David Abner, these concerns are actually not a bad thing and will potentially help investors similar to the way the pricing of Fixed Income ETPs has given investors a unified, transparent and real-time understanding of the pricing of bonds. This has destroyed the shroud of opaque pricing and investor confusion regarding trading in fixed income instruments. In an asset class with multiple digital exchanges with varying pricing levels, with unclear liquidity and potentially fictitious volumes, the introduction of ETPs to the marketplace would potentially lead to a centralisation of fragmented liquidity and a real-time price indicator representing the true costs of investment at any given time. This would assist investors who navigate a world of multiple regulated and unregulated exchanges. Additionally, the risks of keeping assets in motion to trade across the multiple exchanges is increased along with the nuances of storing cryptocurrencies in non- traditional asset custody mechanisms at a time when the insurance world is not developed and able to protect those same investors. 

By Niranjan Patil
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