‘A Big Win for Bitcoin’: U.S. Investors Tired of Waiting for a Bitcoin ETF Now Have Easy Access to Something Almost As Good

Siamak Masnavi

On Wednesday (15 August 2018), an "F share" (ticker: CXBTF) became available for "Bitcoin Tracker One", an exchange-traded note (ETN) that tracks Bitcoin (BTC/USD), and is issued by Swedish company "XBT Provider", a wholly-owned subsidiary of UK company Global Advisors (Holdings) Limited.  

This Bitcoin ETN trades on Nasdaq Stockholm (Stockholm Stock Exchange). Although this is a non-U.S. security, being available as a F share (quoted in USD) makes it more accessible to U.S. brokerage/retirement accounts.

According to Bloomberg, which announced this news, Ryan Radloff, the CEO of CoinShares (Holdings) Limited, the company that holds all the shares in the capital of XBT Provider (the issuer of "Bitcoin Tracker One"), explained why this news was significant:

“Everyone that’s investing in dollars can now get exposure to these products, whereas before, they were only available in euros or Swedish krona. Given the current climate on the regulatory front in the U.S., this is a big win for Bitcoin.”

Although some people may see this product as being very similar to Grayscale Bitcoin Investment Trust (ticker: GBTC), which also offers exposure to Bitcoin, the latter has lower liquidity and is more expensive (according to Seeking Alpha, a single share of GBTC trades roughly 50% over the price we would expect from the underlying asset).

Radloff agrees: "I do see this as a competitive product. Our products historically have not traded at a premium and are liquid.” 

Thomas Lee, Fundstrat Global Advisor's Head of Research, took to Twitter to explain why he was excited by this news:

According to this ETN's Fact Sheet, it first started trading on the Nasdaq Stockholm exchange 18 May 2015. Much more detailed information about the product is available via the 2018 Prospectus.

If you look up CXBTF via a U.S. brokerage account or a market data provider such as ADVFN, you will see a quote that looks something like this:

CXBTF.png

On 17 January 2018, a CNBC article titled "What the US can learn from Sweden about how to launch a bitcoin fund" explained what was special about this ETN:

"An ETN is an unsecured debt instrument that promises to pay the pattern of returns of the bitcoin price. Ironically, despite being an unsecure instrument, the XBT product tracks the spot price of bitcoin by holding the actual currency and forward contracts in case of a liquidity shortfall."

At that time, Laurent Kssis, who serves as CEO and Head of Product Development for the ETN business at XBT Provider AB, told CNBC:

"At that point in time [18 May 2015], the ETN structure was the best route to bring the products to market. As a result of using this structure to bring the product to market, investors have been able to gain exposure to the price movement of bitcoin since 2015. This stands opposed to the U.S., where most investors are still waiting for access to bitcoin exposure via their normal brokerage account."

Matt Hougan, the Global Head of Research at Bitwise Asset Management, who used to be the CEO of Inside ETFs, also spoke to CNBC back in January 2018:

"The [XBT] products are very well designed for what they do. They deliver, unlike GBTC. They give exposure to the returns of bitcoin and ether pretty well. I think they were well executed and they've done their job."

 

Featured Image Credit: Photo via Pexels.com 

BlockFi Updates Terms of Service for Its BTC and ETH Interest Accounts

On Tuesday (April 23), FinTech startup BlockFi announced new terms of service for its Bitcoin (BTC) and Ether (ETH) interest accounts, and said that it had made the BlockFi Interest Account (BIA) available in India.

BlockFi, which is based in New Jersey, United States, was founded in July 2017 by Zac Prince (CEO) and Flori Marquez (VP of Operations) and launched in August 2017. Among others, it is backed by ConsenSys Ventures, Fidelity subsidiary Deonshire Investors, Morgan Creek Digital, and Mike Novogratz's Galaxy Digital. 

In April 2018, BlockFi started offering USD loans collateralized by your cryptoassets (Bitcoin and Ether). Roughly six months later, it expanded the range of cryptoassets that it accepts as collateral to Litecoin and stablecoin Gemini dollar (GUSD).

Then on March 4, BlockFi launched the BlockFi Interest Account (BIA):

... users can securely store their Bitcoin or Ether at BlockFi and receive 6% annual interest, paid monthly in cryptocurrency. Interest earned in a BIA compounds monthly, delivering an industry-leading APY of 6.2%. The program has been in private beta since the beginning of 2019 and already holds over $10 million in assets from retail, corporate, and institutional crypto investors."

BlockFi said that this product offered the following advantages over competitors:

  • compound interest
  • institutional backing
  • interest paid monthly in crypto (i.e. in BTC if you have a Bitcoin interest account and in ETH if you have an Ether interest account)
  • no-notice withdrawals

We also found out via the FAQ section of the BlockFi website that although "there is no minimum or maximum deposit for the BlockFi Interest Account," only "deposits over 1 BTC or 25 ETH will accrue interest" and that "6% interest will only be earned on balances below 250 BTC or 7500 ETH."

Sadly, on March 20, some bad news was announced for holders of the BlockFi Interest Account with large balances (over 25 BTC or over 500 ETH). 

BlockFi said that since the launch of the BIA program, it had discovered that "approximately 75% of BIA clients have a balance of less than 5 BTC or 150 ETH," and that the "median account balance is $7,000 USD."

Furthermore, it had seen "unanticipated demand from businesses like crypto hedge funds and VC firms," and realized that these firms open large BlockFi interest accounts "as a way to bolster their returns." 

BlockFi added that "starting April 1st, only BIA balances of up to and including 25 BTC or 500 ETH (equivalent to roughly $100,000 and $70,000 respectively) will earn the 6.2% APY interest rate," while "balances over that limit will earn a tiered rate of 2% interest."

The second bit of bad news—this one affecting everyone not just BTC/ETH whales—was that from April 5, it will be "adding a flat withdrawal fee of 0.0025 BTC and 0.0015 ETH."  

In today's announcement, BlockFi had several interesting things to say:

  • As of April 2019, BlockFi is holding $53 million in crypto deposits for its clients in BIAs, and these funds are earning interest every day.
  • BlockFi is "retroactively" (as of April 1) reducing the minimum balance requirement for the Bitcoin BIA from 1 to 0.5 BTC. It hopes to reduce this minimum balance limit even further in the near future.
  • For Ether BIAs, from now on, only balances up to 250 ETH will earn the higher interest rate (i.e. 6.2% APY), whereas balances over this limit will earn only the lower interest rate (2% APY). BlockFi says that its "ability to pay interest to our clients is based on crypto market lending conditions," and since (1) it needs to "work with institutional counterparties to generate this yield" and (2) "demand for borrowing ETH has dropped" during the past month, its has no choice but to adjust "ETH tier rates" accordingly.
  • The BIA product is now available in India. This brings the total number of countries served by BlockFi to 65.

 

Featured Image Courtesy of BlockFi