Europe’s new spot Bitcoin ETF boosts market share: BDSwiss
Mazen Salhab of BDSwiss is optimistic about the future of cryptocurrency.
Indeed, the U.S. Securities and Exchange Commission (SEC) is making life tough for crypto businesses like Ripple, Binance and Coinbase in the U.S. However, market sentiments are unlikely to diminish, Salhab says.
Read on to hear the recently appointed chief market strategist for BDSwiss MENA (Middle East and North Africa) opine on a variety of topics, including the spot Bitcoin ETF that just went live, the Guernsey Financial Services Commission (GFSC) and the differences between exchange-traded notes (ETNs) and exchange-traded funds (ETFs).
The Jacobi FT Wilshere Bitcoin ETF recently began trading on Euronext Amsterdam. Why is this a major win for Europe and a loss for the U.S.?
Salhab: As the U.S. regulator SEC cracked down on the crypto sector, the markets’ sentiments are unlikely to diminish while crypto traders will keep looking for the best alternatives to the U.S.-based crypto exchanges and regulations. If London becomes able to attract more BTC funds and tradable crypto assets, it will gain both a higher market share and more sophisticated executives in this sector — not to forget that even the US-based crypto exchanges may start shifting outside the U.S. jurisdiction. The crypto market cap remains above $1 trillion now, representing huge business and growth potentials for trading firms, innovations, and fintech development in the U.K. and the eurozone.
How does the GFSC differ in its approach toward crypto companies versus the SEC?
Since October 2021, the GFSC approved Guernsey’s first crypto fund, which is available to institutional investors. What GFSC tries to do is to be more flexible and pragmatic than the traditional regulators but ensure that the requirements are met. We think that the comparison between SEC and GFSC remains insufficient, considering the political and financial importance between the two jurisdictions, the impact on the global crypto markets, and the ability to influence regional regulators and funds. The flexibility of GFSC earned them a good reputation in crypto markets, however, challenges remain intact from other regional competitors and the probable change of the regulations in the U.S. as well.
What are the pros and cons of investing in a Bitcoin ETF?
Investing in BTC ETF allows traders and investors to have exposure to Bitcoin without dealing with a crypto exchange. That means you don’t need to fear losing your digital wallet password or cybersecurity risks. Bitcoin ETF makes investing crypto assets more accessible at a lower cost than buying the tokens directly. The traders don’t have to pay the market value of BTC to own it as ETF value depends on markets’ fluctuations, supply and demand measures, terms and conditions of the ETF issuer, and regulators’ requirements. At the same time, buying an ETF doesn’t mean you own BTC. Buying a Bitcoin ETF doesn’t make you a BTC owner, which is a very pivotal issue here. The ETF provides leverage to the value of the digital currency; it may not accurately track the market’s price of Bitcoin. BTC is still a decentralized crypto while ETF is a financial asset that remains exposed to financial system risks, and regulators’ intervention.
Jacobi first won approval for the fund in October 2021. It opted to push back listing plans due to inopportune circumstances in the digital asset market (i.e., the collapse of the Terra ecosystem and the bankruptcy of FTX). Is the impact of 2022’s crypto winter still reverberating?
The crypto market is still a very new one, and a lot of changes and developments are likely to happen ahead. So, yes, the risks remain intact. We think that market sentiments always change and should not be the sole equator in our assessment. The terminology of the crypto assets, fragile cybersecurity measures, and shadow regulations are likely to keep the discussions open between the regulators and market participants that include exchanges and financial firms. We still think that the best time to be part of this crypto market is when the trading is flat and crypto value is not bubbled. Crypto winter offers an exceptional opportunity to re-invest, not the opposite.
What’s the difference between ETNs and ETFs?
Leveraged ETFs are available for most indexes such as NASDAQ and Dow Jones. Leveraged ETFs use financial derivatives and debt to expand the returns, while traditional ETFs track the securities in its underlying index on one — to one basis, a leveraged ETF may aim for a 2:1 or 3:1 ratio. Both ETFs and ETNs are designed to track an underlying asset. In practice, both are similar; the main difference is that when you invest in an ETF, you are investing in a fund that holds the assets it tracks, those assets can be stocks, bonds, gold, commodities, futures, or mix. ETNs track an index, and the returns it pays are based on the performance of that index, but it doesn’t own the underlying assets. Both ETFs and ETNs can be sold or bought on an exchange. An ETN is more like a bond, an unsecured debt note issued by an institution. An ETF is a fund that contains a basket of securities.
Dozens of applications to the SEC have been filed for a Bitcoin ETF. Will it be a while before they’re approved?
We think that if the SEC approves one reliable proposal for BTC ETF, it is likely to approve the rest of the applications that meet the regulator’s rules. We don’t think that SEC approval will be fast due to the complex nature of the crypto assets and the lack of knowledge and experience by many regulators. As the U.S. financial markets remain the biggest in the world, the SEC will not be in a rush to approve any BTC ETF proposal — totally different from the other smaller economies’ pragmatism. At the same time, we still think that the next coming years will have many approved ETFs in crypto and other digital assets. Our view is that the trend will be very promising, considering the dynamics of the tech sector, innovation trends globally, stable crypto value, higher mass users, and more global adoption.
