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  • VanEck launched 100% physically-backed Bitcoin derivative on a regulated section of Deutsche Börse.
  • The news may become another bullish catalyst for BTC.

VanEck, a global ETF and mutual fund manager, has launched a Bitcoin-backed ETN – a debt instrument tracking a given market – and listed it on Germany’s Deutsche Börse Xetra. The new cryptocurrency derivative is 100% Bitcoin collateralized, meaning that the fund’s investors can now gain exposure to the pioneer digital coin without actually buying it themselves.

Another regulated Bitcoin product goes live

According to VanEck’s official announcement, the product will provide state-of-the-art investor protections, low premium and discount to net asset value (NAV), and transparent pricing and professional asset management services offered by the company.  

ETN’s price follows the performance of the MVIS CryptoCompare Bitcoin VWAP Close Index, which is linked to Bitcoin price. 

Commenting on the news, Martijn Rozemuller, Head of Europe at VanEck, said:

With our VanEck Vectors Bitcoin ETN, we offer a product that allows investors to benefit from the performance of Bitcoin. However, instead of requiring a so-called wallet, as is customary with cryptocurrencies, in which bitcoin is stored separately from the rest of the portfolio on the blockchain, the purchase and storage of ETN is as uncomplicated as trading in shares or ETFs.

The asset manager believes that Bitcoin should be a part of any contemporary investor portfolio as it has a low correlation to the traditional asset classes. This feature makes it a perfect diversification and hedging tool that will protect wealth during calamitous and volatile periods on the markets. 

VanEck analysts found out that Bitcoin exhibited lower 90-day volatility that 112 S&P 500 stocks. Meanwhile, Bitcoin’s year-to-date (YTD) volatility has been lower than 145 stocks. The research results confirm the theory that the cryptocurrency has matured and become more stable. 

Bitcoin's volatility compared to S&P 500 stocks

Bitcoin’s volatility compared to S&P 500 stocks

Much of the volatility over the past few years can be attributed to sensitivity to small total market size, regulatory hurdles, and generally limited penetration in mainstream stock and capital markets. While bitcoin continues to be a volatile asset, it may surprise researchers and investors as to what other major assets have been more volatile than bitcoin.

Investors can enjoy the full regulatory protection

As VanEck’s Bitcoin ETN is fully collateralized, the fund uses all the money invested in the product to buy Bitcoins. All Bitcoins purchased by VanEck are held in the cold storage of Bank Frick, the cryptocurrency custodian, registered and regulated in Liechtenstein. According to the announcement, Bank Frick is a pioneer of Bitcoin integration with Europe’s regulated banking environment. 

VanEck is committed to supporting Bitcoin and financial innovation. We are thankful to partners, clients, regulators, financial services industry participants, and Bitcoiners for the work and support in making Bitcoin more institutionally accessible. Thank you, and well done all, Gabor Gurbacs, VanEck’s director of digital asset strategy, wrote on Twitter.

He also added that there are no US Bitcoin exchange-traded funds (ETFs) available today. Once they are launched, they will have similar volatility characteristics as many stocks in well-known indices and ETFs. The company applied for a Bitcoin-based ETF with the SEC in 2019 but withdrew it afterward. 

Another boost for Bitcoin price

Meanwhile, the news may become another bullish catalyst for the pioneer digital currency. The new instrument allows institutional investors to trade it, just like any other regulated exchange-listed products. 

VanEck Vectors Bitcoin ETN is listed in the regulated segment of the Deutsche Börse Xetra, meaning that the regulated financial companies and asset managers will have no legal issues. 

BTC/USD, daily chart

BTC/USD, daily chart

At the time of writing, BTC/USD is changing hands at $19,270. The coin hit a new multi-year high at $19,450 on November 24 and managed to settle above the psychological $19,000. The coin has gained 1.5% on a day-to-day basis and over 6% on a weekly basis. 

While the market is grossly overbought, the price may continue moving forward and retest the all-time high before a downside correction starts.