Bitcoin Securities Trade Rises as Investors Seek Crypto Exposure

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Investors rushed to buy and sell bitcoin-related securities on both sides of the Atlantic, with a German exchange-traded product seeing trading volumes matching Europe’s most popular funds.

BTCetc Bitcoin Exchange Traded Crypto (BTCE) recorded average daily transactions amounting to €57 million in the first 11 days of January, according to data from Deutsche Börse.

A similar trend took hold on Wall Street. Grayscale’s Bitcoin Trust, which like its German counterpart tracks the price of digital currency, saw an average daily turnover of nearly $1 billion in the first two weeks of this year, more than nine times the average in 2020, according to Bloomberg data. . Its assets under management exploded to $23 billion, from $17 billion at the end of December and $2 billion at the start of 2020.

The surge in securities trading shows how investors are increasingly looking to gain exposure or bet against cryptocurrencies in traditional markets rather than buying digital currencies outright.

BTCE’s surge in trading this year – a strong recovery from the daily average of 15.5 million euros in December, the previous all-time high – follows a ten-fold increase in bitcoin’s price since March to peak of $42,000 earlier this month, before making some gains.

Stephan Kraus, head of ETF segment at Deutsche Börse, said the structure of the BTCE exchange-traded note, which mitigated regulatory concerns and counterparty risk associated with bitcoin trading, had “enhanced the attractiveness of crypto investments. -currency for institutional investors”, who can trade without the need to set up specialized digital infrastructure or use an “unregulated crypto platform”.

Trade data from Deutsche Börse shows a number of trades above €30,000, which the group says are unlikely to come from day traders or other retail investors.

Bradley Duke, co-founder and managing director of ETC Group, the issuer of BTCE, said he thinks institutional investors are starting to buy the cryptocurrency as a “safe haven”.

“Bitcoin has always had a groundswell in retail, people interested in technology, and it’s been seen as an investment in the ‘Wild West’. It has really changed in the last six months,” he said.

“Coronavirus played a part in that. It’s starting to look like an attractive alternative to currencies that could be devalued by stimulus packages. The packages are necessary, but there are real concerns that they could bring inflationary forces into play.

Line chart of $ per coin showing Bitcoin

Yet the cryptocurrency market has remained dominated by retail traders and more speculative businesses, including hedge funds, as opposed to traditional fund managers such as pension funds, which remain nervous about intense swings. bitcoin prices.

The UK’s Financial Conduct Authority has banned the sale of cryptocurrency-related derivatives, including exchange-traded notes, to retail investors. He also this week renewed his warning that anyone investing in crypto assets “should be prepared to lose all their money.”

Christine Lagarde, President of the European Central Bank, on Wednesday called for global regulation of cryptocurrencies to help tackle their use in “totally reprehensible money laundering activity.”

Also on Wednesday, ETC Group listed similar exchange-traded notes denominated in dollars, pounds sterling and Swiss francs on SIX, the Swiss exchange, with Mr Duke saying more products would be launched “in the coming weeks” based on d other cryptocurrencies and a basket of cryptos.

Continental Europe has seen a wave of similar launches, with VanEck and 21Shares also offering bitcoin ETNs on Deutsche Börse. The Swiss exchange now lists 34 crypto exchange-traded products from six issuers.

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