It’s not a long time ago when the Swiss Exchange SIX launched the worlds first exchanges traded product. The ETP was anticipated to bring in some institutional monies in cryptos and the recent data shows that it has disappointed. The ETP has recorded some strong volume and inflows it happens to coincide with the drop in Bitcoin and Ethereum Prices clearly showing that the savvy investors are buying the dips.
The Correlation Between Volume of ETP and declining Prices Continues to be Strong
According to the recent tweet put forward by Su Zhu, CEO at FX Hedge Fund, the recently launched exchange-traded product is seeing record volumes and inflows continuously since the market has started melting down.
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
Although these are early signs but looks like the savvy investors are buying the dips. Zhu has also put forward his working that shows that there is a strong negative correlation between the volume of the ETP and prices of cryptos, that every time the prices of Bitcoin and Ethereum dip the volumes of ETP increases.
Inception to date volume is 3.5mill USD with similar amount of shares created thus far also. You can see the below chart for the negative correlation as well (higher volume as prices dip, and lower volume as prices rise). This signals that ETF buyers have firm levels in mind. pic.twitter.com/vXRXgHO4Q4
— Su Zhu (@zhusu) December 11, 2018
Looks like the launch of cryptocurrency exchange-traded product (ETP) at the end of November, on Switzerland’s Zurich-based SIX Exchange, hasn’t gone unnoticed by savvy investors hungry for some good news about the currently bearish asset class.
Investing.com quoted Lars Seier Christensen, Chairman of the Concordium Network and the Concordium Foundation saying that such products definitely have an advantage
““[The] upside: usually, these baskets of exchange-traded products are designed to give the investor a broader, more balanced access to a sector of interest, where the investment manager is offering to do the hard work of picking what should be in the shopping basket, getting liquidity organized, managing pricing, booking the trades and creating an indexed price for simple valuation.”
Her explanation of the product gives us an insight into why institutional investors would be interested in an exchange-traded product for cryptos.
The Amun Crypto Basket Index (SIX: HODL) offers exposure to the four most liquid digital currencies, as defined by market capitalization: Bitcoin (BTC), Ethereum(ETH), Ripple (XRP) and Litecoin (LTC).
For those unfamiliar with the structure of an exchange-traded product, it’s a type of security whose value comes from other investment vehicles—such as currencies, commodities or in this case cryptocurrencies—to which it is benchmarked. Its pricing is derived from the assets it holds and trades intra-day.
Alex Mashinsky, CEO of Celsius, a blockchain-based payment network, has a more optimistic take. He believes that institutions worldwide and family business offices are looking to add digital currencies to their portfolios. The diversification efforts in this regard would generally add 5-10% worth of holdings in this asset class, making the potential benefit for these funds considerable. He too was quoted by Investing.com saying
“Many do not know how to buy and hold such assets or don’t want to touch the underlying asset. Because of this, many ETF, ETN and ETP products have been launched over the past three years. Each jurisdiction has its own rules and regulations. As well, many new funds have not yet been approved and are pending before regulators.”
With volumes data for ETP slowly rising it looks like the product is slowly becoming popular and hopefully it can one the floodgates for institutional monies.
Will Amun Crypto give confidence to SEC to clear the first Bitcoin ETF in the US? Do let us know your views on the same
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Sunil is a serial entrepreneur and has been working in blockchain and cryptocurrency space for 2 years now. Previously he co-founded Govt. of India supported startup InThinks and is currently Chief Editor at Coingape and CEO at SquadX, a fintech startup. He has published more than 100 articles on cryptocurrency and blockchain and has assisted a number of ICO’s in their success. He has co-designed blockchain development industrial training and has hosted many interviews in past. Follow him on Twitter at @sharmasunil8114 and reach out to him at sunil (at) coingape.com