A Long Road to Approval

After a grueling effort throughout 2019 to convince the United States Securities and Exchange Commission (SEC) to bless its Bitcoin ETF proposal, VanEck has finally rolled out a new product—a Bitcoin-backed exchange-traded note (ETN). But wait, hold on, not so fast; this beauty is not gracing a U.S. exchange, but rather the Deutsche Boerse Xetra in Germany. You might think of it as a long-distance love affair that finally blossomed after some heavy courting.

Understanding the Difference: ETN vs. ETF

Now, let’s dive into what this ETN is all about. Unlike an ETF, which lets investors buy shares that track the price of an asset, an ETN is structured as a debt instrument. So, think of it like a debt on a pair of roller skates; it tracks the sometimes elusive Bitcoin market but requires a bit of finesse to navigate. This means it’s easier to access for investors who don’t want to deal with the complexities of owning Bitcoin directly.

The Safety Net: Fully Collateralized

The icing on the cake? The VanEck Vectors Bitcoin ETN is 100% backed by physical Bitcoin. Product manager Dominik Poiger explains, “Our Bitcoin ETN is fully collateralized. This means that the money invested in the ETN is actually used to buy Bitcoin.” So every time you buy an ETN, you get a piece of Bitcoin standing right behind it, ready to take the stage. In true superhero fashion, the Bitcoin will be kept cozy in cold storage by Bank Frick, a crypto custodian based in Liechtenstein.

The SEC Saga Continues

VanEck didn’t just stroll into the crypto game; they have been tickling the SEC’s fancy for quite a while. Their ETF aspirations faced several bumps in the road, not least being the Chicago Board Options Exchange’s withdrawal of the proposal last September, right when things were about to get thrilling. Will the SEC ever embrace an ETF? It remains to be seen. For now, the ETN is their equivalent of settling for coffee instead of a full course meal.

Bitcoin’s Volatility: A Surprising Revelation

In an interesting turn of events, VanEck recently published research indicating that Bitcoin is less volatile than many formidable players on the S&P 500 stock list. Shocking, isn’t it? This finding could make even the staunchest stock market bull reconsider their portfolio, and they might just find themselves whispering sweet nothings to Bitcoin.

Conclusion: A Step Forward or a Detour?

While the launch of the Bitcoin ETN can be seen as a win for VanEck and the cryptocurrency world, it also highlights the ongoing challenges in getting full-fledged ETFs approved. It’s like that friend who keeps trying to convince you to attend another
Karaoke night—you’re not sure if it’s a breakthrough moment or just a step further down the road. Either way, keep your eyes peeled; the crypto world is an ever-evolving landscape filled with surprises.