- Asset manager Invesco has launched a Bitcoin spot ETN in Europe, trading under the ticker BTIC on Xetra digital stock exchange.
- The firm recently abandoned plans to launch a US Bitcoin futures ETF, citing risks associated with the contango bleed.
Invesco, an American investment management company, is now offering a Bitcoin (BTC) spot ETN (exchange-traded note) in Europe.
Per a Monday announcement, the exchange-traded product (ETP) is now listed on Xetra digital stock exchange under the ticker BTIC. Xetra belongs to German stock market operator Deutsche Borse.
An ETN falls under the ETP umbrella term, which also includes exchange-traded futures (ETFs) and exchange-traded commodities (ETCs). An ETN is intended to track returns on a related index or asset. The Invesco offering is “physically” backed by actual Bitcoins, a feature that gives it a better performance shot compared to derivatives-based products or crypto trusts like GBTC. The ETN tracks the CoinShares Bitcoin Hourly Reference Rate index, to deliver the performance of Bitcoin, minus fees.
Spot ETFs closely track the ‘immediate’ price of the underlying asset. Differently, futures ETFs lock a future cost of the commodity or index and may underperform or outperform the spot price.
Invesco and Bitcoin Spot ETN in Europe
Notably, the ETN was admitted by the Regulated Market of the Frankfurt Stock Exchange and is centrally cleared through Eurex Clearing. This provides “significantly reduced risks in the settlement of transactions,” reads the announcement.
According to ETF Stream, the ETN has a total expense ratio (TER) of 0.99 percent. The Bitcoin holdings it tracks will be under UK-based Zodia Custody, – the FCA-registered crypto custody platform of the Standard Chartered. The ETN targets institutional investors seeking Bitcoin price exposure through convenient investment vehicles. Gary Buxton of Invesco noted;
Most of the discussions we have with clients are not really about bitcoin itself but more about the access to bitcoin and how you get comfortable with segregation, how you get comfortable with the valuation. One of the strengths of ETPs is as an access vehicle,
Buxton says the company preferred a spot-based Bitcoin product to a futures-based product. This was due to concerns in synthetic liquidity and how this may influence valuation over time. Moreover, he sees physically-backed Bitcoin as a more “observable” product.
Nevertheless, the US Securities and Exchange Commission (SEC) has been leaning on Bitcoin futures ETFs more than spot ETFs. This decision, according to the commission, is for the sake of investor protection.
In August, Invesco filed for a Bitcoin futures ETF but withdrew its application just hours before the product went live. The company, as a top executive explained, sees a futures ETF as a riskier ETN due to the theory of contango bleed. Such occurs when there is fund underperformance as longer-dated futures contracts trade at higher prices than shorter-dated contracts.