As a native digital society, I am pleased that the SEC has finally approved the issuance of a Spot ETF on Bitcoin, an asset that has gone from being worth $1 to surpassing the $70,000 mark in March of this year in just 15 years. Additionally, the number of inquiries I receive, even from my institutional clients, demonstrates that this event has sparked widespread curiosity and increased research into the cryptocurrency sector, not limited to the United States or the Americas but extending to Europe as well. Not an insignificant factor.
I also expect this curiosity to translate into asset growth, which, in my opinion, will be driven by a mix of investors. On one hand, there will be individual investors who may have been intending to invest in Bitcoin for some time but found developing an entire infrastructure for this purpose too burdensome. On the other hand, there are institutional investors who have not invested in cryptocurrencies until now simply because they couldn’t. It’s important to remember that the latter must adhere to constraints that require them to acquire numerous features to access the crypto universe (trading, custody, risk management, etc.) that do not actually justify a single investment. Being able to rely on an ETF means no longer being subject to these barriers.
However, it is necessary to make a necessary clarification: everything stated so far is valid only in the United States; in Europe, the situation is different. In particular, according to the provisions of MiFID2, European ETF providers cannot distribute KIDs and KIIDs for products and funds in the USA; therefore, ETFs that are listed overseas are not intended for distribution within our borders. In conclusion, retail investors – or the clients of private bankers – in the Old Continent cannot access them.
At this point, one may wonder, in light of what has just been seen, why my clients have shown such great curiosity if European (and therefore Italian) investors must forego investing in Bitcoin via ETFs. The answer is simple: because there is an alternative. Not only that, this alternative exists and has been available on the market for 5 years.
I’m talking about Exchange Traded Products (ETPs) on cryptocurrencies, of which we at 21Shares are world leaders in terms of product range and assets under management. This instrument is different from an ETF, as it is technically structured as a bond and is classified as a “Special Purpose Vehicle” (SPV). In this way, European investors will also have the opportunity to expose themselves to a rapidly expanding market through a solid and well-known investment solution, regulated by major European authorities and stock exchanges and passported for institutional and retail clients, including in Italy.
Furthermore, these products allow compliance with the regulations and current UCITS 5-10-40 diversification rules, according to which it is not possible for the issuer to structure a UCITS harmonized ETF (or UCITS compliant) with a single asset as the underlying, as there would not be a sufficiently diversified level. This is why, to date, it is not possible to access a UCITS harmonized ETF on physical gold, silver, or Bitcoin in Europe, but the corresponding ETPs can be accessed.
In conclusion, I observe how the approval of the ETF in the US has come at a very favorable time for the Bitcoin market. Indeed, the crisis of US banks in March 2023, the surge in inflation, and the unstable geopolitical scenario have allowed the digital asset to gain increasing recognition for its role as a store of value, protection against inflation and counterparty risk, and investment in technology, leading investors to increasingly view it as a long-term opportunity rather than a short-term speculative investment.This has also led to a significant reduction in its volatility, which, although still quite high for those with a low risk appetite, has often deterred many potential investors in the past.
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