American investment management firm Vaneck announced the launch of its new bitcoin exchange-traded-note (ETN) for the European market. The institutional-grade financial product comes as the latest in a series of high-level developments that pushed bitcoin into the arena of public discussion.

In brief

  • VanEck launched a physically backed bitcoin exchange traded Note.
  • The ETN will use volume-weighted indicators to track the BTC price.
  • A bitcoin ETF is inevitable, according to Grayscale’s managing director.
  • Bitcoin is trading above $19,250 at the time of publishing.

As you can imagine, the ETN will allow investors to easily invest in bitcoin, as opposed to buying “spot” via an exchange. Typically, ETN’s or ETF’s are highly sought-after due to ease of access. Many investors do not want to deal with security, regulatory and storage issues that come with dealing with an exchange.

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Bitcoin’s volume-weighted price

As such, the ETN is based on the MVIS CryptoCompare Bitcoin VWAP Close Index, which measures bitcoin’s price based on hourly volume-weighted moving average (VWAP) prices. This is a popular indicator used by institutional traders to calculate the average price of a security built on both its volume and price. Volume-weighted prices are believed to represent a security’s value more accurately.
Momentum indicators such as the Money Flow Index (MFI) are also built using a similar structure, due to the school of thought which posits the importance of volumes in deducing price-action relevance.

VanEck spoke of bitcoin’s volatility and its increasing popularity as an alternative to gold, saying that ETN provides benefits to European investors. Martijn Rozemuller, head of VanEck Europe said in a statement: “Bitcoin’s historically relatively low correlation to other asset classes makes it an excellent way to contribute to the diversification of a portfolio.”
The launch further develops VanEck’s Bitcoin product offerings available on the market, which have seen mixed responses. Last year, it introduced a “Limited ETF” in partnership with investment firm SolidX for qualified institutional investors. Unfortunately for them, the product didn’t gain much traction.
VanEck’s attempt at a fully-fledged bitcoin ETF in the US has been repeatedly shut down over the years, but this hasn’t stopped the company from trying over and over again.

An ETF is inevitable

Back in July, Grayscale’s managing director, Michael Sonnenshein spoke candidly about the inevitability of a bitcoin exchange-traded fund in light of the fact that digital currency assets are not going away.
Speaking to Morgan Creek founder Anthony Pompliano back then, he said: “We think a Bitcoin ETF is a matter of when, not a matter of if.”
“The regulators have done a fantastic job of staying ahead of the curve on the digital currency asset class as a whole,” he added.  
Meanwhile, bitcoin is surging ahead. The pioneer crypto trades at $19,250 as of press time and is just a few percentage points away from its historic 2017 all time high.

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