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Trade Euro Based Bitcoin ETNs On the Nordic NASDAQ

Bitcoin Tracker EUR, the second bitcoin Exchange Traded Note, will launch on Nasdaq Nordic this Monday offering a new investment vehicle, denominated in Euro, from the same company that offered the first bitcoin ETN, XBT Provider.

The first Euro-denominated bitcoin Exchange Traded Note (ETN), Bitcoin Tracker EUR, will debut on Nasdaq Nordic on Monday, Oct 5. This will be the second ETN issued by XBT Provider, who issued the first ever bitcoin ETN, called Bitcoin Tracker One, on the Nasdaq Nordic earlier this year, on May 18.

"We are proud to offer a Euro-denominated instrument to meet demand from investors world-wide.”
— – Alexander Marsh, XBT Provider CEO

ETNs are unsecured debt obligations from an issuer, listed and trade on exchanges. Bitcoin ETNs are an easy way for retail and institutional investors to gain exposure to the digital currency, without buying the underlying asset. The first ETN was developed in 2006 by Barclays Bank, the leader in ETN issues, so that retail investors could invest in hard-to-access assets, particularly in the commodity and currency areas.

With the launch of Bitcoin Tracker EUR, Nasdaq Nordic has a second investment instrument whose underlying asset is bitcoin, and both are issued by the same issuer, XBT Provider. The first, Bitcoin Tracker One, was launched on Nasdaq Stockholm, but is now available for retail and institutional clients, in 179 countries, for anyone with an Interactive Brokers account.

Bitcoin Tracker One is listed in Swedish Krona (SEK) and has exposure to bitcoin and the US Dollar, which is the underlying currency of the instrument. The company chose the USD as the underlying currency because “the BTC/USD market is the most liquid bitcoin market widely available for trading.”

“Bitcoin Tracker One has during periods been among the top 3 most traded ETNs on Nasdaq Nordic since launch.”
— – Alexander Marsh

As of the day of publication, Bitcoin Tracker One is among the most traded ETNs in the foreign exchange category on the Nasdaq Nordic, out of 51 available ETNs in total.

“Bitcoin Tracker EUR will give the investors all the benefits of Bitcoin Tracker One, and also offer a currency they are used to invest in." – Staffan Helgesson, General Partner at Creandum and Board Member of XBT Provider

Since ETNs are debt securities, guaranteed by the issuer, investors need to asses more than just the risks surrounding the underlying asset. If the issuer goes bankrupt, the investors may not receive any capital. XBT Provider is a Stockholm-based company established in January 2015, with the sole purpose of issuing securities. The company is part of the KnC Group AB, which is particularly well known for its subsidiary, KNC Miner.

For investors who do not want to rely on the issuer’s creditworthiness, and prefer investing in equity securities rather than debt securities, there are also bitcoin Exchange Traded Funds (ETF). A bitcoin ETF is an investment fund that holds bitcoin, and divides ownership into shares.

With the increased popularity of bitcoin, more investment vehicles are becoming available to investors. Earlier this month, ARK Investment Management announced the first ETF on a major US exchange, through investment in Grayscale’s Bitcoin Investment Trust’s shares.

No matter the types of bitcoin investments, the price of bitcoin is most important. For the two bitcoin ETNs, the higher the price of bitcoin, the higher the ETN payouts and the more investors.

The company cited that bitcoin holders do not trade bitcoin often, instead they hold onto them for “speculation, saving or for other long-term purposes.”

According to the prospectus, only 4 percent of all bitcoins were traded within one week by their holders, compared to 24 percent over three months, more than half over six months and 38 percent in one year.

“Since the market value of Bitcoin relates to an expectation that Bitcoin can be used in transactions, the fact that Bitcoin to a large extent is used for long-term purposes may weaken such expectations. A decrease in expectations can lead to a decrease in market value of Bitcoins and hence a decrease of the value of the Certificates.”
— – XBT Provider

Other than miners and some major participants who regularly cash out bitcoin to cover overheads, only a small proportion of all Bitcoins seems to be used for transactions.

Since bitcoin’s price reflects the expectation of bitcoin usage in transactions, this low usage could affect the price of bitcoin and therefore its ETN performance. The company hopes that the introduction of Bitcoin Tracker EUR will entice more investors to actively invest in bitcoin. Marsh adds that with Bitcoin Tracker EUR "we hope to further eliminate the boundaries that earlier prevented individuals and companies from being able to actively invest in what we believe will be the future of money"


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