The Swiss HODL ETP (exchange-traded product) that was launched in November is proving to be a success, if we look at the investment inflows, to date.
The ETP has been approved and listed on the biggest Swiss exchange, SIX, on Nov 22. In just over 12 days of trading activity, the HODL product has garnered around $3.5 million in investment.
The HODL ETP was created by Amun AG, a company which also provides a cryptocurrency index. The important thing to note is that the derivative product is only available to institutional investors.
What is the HODL ETP?
The ETP follows the index strategy of Amun’s basket of five popular digital assets: Bitcoin, Ethereum, XRP, Litecoin and Bitcoin Cash. Currently, Bitcoin is the largest holding in the portfolio with a 50 percent share, followed by XRP with 30 percent. (Interestingly enough, but not surprising, as of Dec 1, 2018, there are no Bitcoin Cash holdings in Amun’s Crypto Basket Index. This move should be related to the fork of the network that took place last month.)
Under the hood, HODL ETP is a physically-backed crypto derivative product — but it’s not physically settled. What this means is that the fund purchases digital assets with all of the invested money to offer exposure to the cryptocurrency market. The portfolio is re-weighted monthly to accurately reflect an exposure to 75 percent of the cryptocurrency market.
The index built by Amun has been showing better results than simply investing in Bitcoin. The out-performance is exacerbated in the bull run of 2017 but has since started to inch closer to Bitcoin’s returns.
What’s the big deal?
Statistics show that interest from institutional investors is steady and volume keeps increasing every time the cryptocurrency market dips. As Su Zhu has revealed, the volume spiked on Dec 6 and 7, when Bitcoin registered another 10 percent drop in price to put in a new low around the $3,300 mark.
Last Thurs and Fri we broke volume records again on the Swiss HODL ETF with 53,233 shares and 62,986 shares traded respectively. That coincided with the dip in BTC to 3.2k and ETH to near 80. The correlation between volume and price continues to be very strong at (-68%). https://t.co/Meuaa9MXCV
— Su Zhu (@zhusu) December 11, 2018
During the crypto winter, there has been a strong negative correlation between price drops and buying volume. Grayscale Investments has seen Bitcoin holdings for its clients increase — even during heavy downturns.
The Swiss HODL ETP launch has seen a lot of attention from the media, and rightfully so. Even though it’s not the Bitcoin ETF that many expect, it is the closest collateralized debt security to it. The other attempt at offering a crypto derivative product for institutional investors is CoinShares’ Exchange Traded Note (ETN). The ETN, however, is just a price tracker and does not purchase cryptocurrencies with the invested money.
Could the launch of the Swiss HODL ETP be a trial exercise to gauge the sentiment of institutional investors? The Amun Crypto Basket Index is provided by the MVIS, which is a company of Van Eck Group. Van Eck has been at the forefront of negotiations with the Securities and Exchange Commission (SEC) on a potential Bitcoin ETF approval. The SEC has delayed the decision on their proposal to Feb 2019.
Could a potentially successful ETP bring SEC representatives closer to an ETF approval? Tell us what you think in the comments below!
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