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What are bitcoin ETNs?
Bitcoin ETNs will soon begin trading on the London Stock Exchange. But what are these financial products and what impact will they have on the cryptocurrency market? (Jeremyreds via Getty Images)
The London Stock Exchange (LSE) will begin trading bitcoin and exchange-traded notes (ETNs) next Tuesday, May 28, allowing investors to gain exposure to cryptocurrency performance without actually holding the cryptocurrencies.
But what exactly are bitcoin and ether ETNs and what impact will the approval of these financial products have on the cryptocurrency market?
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According to the LSE, ETNs track the performance of underlying assets such as bitcoin or ether and are traded and regulated like normal shares. They benefit from market maker support with guaranteed liquidity, allowing investors to trade on the stock exchange during London hours.
ETNs can also be held in individual savings accounts (ISAs) or self-invested personal pensions (SIPPs) and, if held directly, are entitled to capital gains tax treatment in the UK.
Impact on the cryptocurrency market
The debut of bitcoin (BTC-USD) and ether (ETH-USD) Exchange Traded Notes (ETN) on the London Stock Exchange (LSE) marks another milestone for the cryptocurrency market, providing a new avenue for investors to gain exposure to these digital assets without holding them directly.
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ETNs track the performance of underlying assets such as bitcoin or ether, allowing for a more traditional investment approach with the benefit of guaranteed liquidity. This structure is particularly attractive to institutional investors who may be wary of dealing with cryptocurrencies directly due to security and regulatory concerns.
To know more: Bitcoin’s Success with SEC Fuels Anticipation for Ether Spot ETF
The introduction of the bitcoin and ether ETNs on the LSE is expected to have a positive impact on the price action of both cryptocurrencies. Because ETNs can be held in ISAs and SIPPs, they become accessible to a wider range of investors, thus increasing demand.
This increased demand, combined with the legitimacy brought by listing on a major exchange like the LSE, could lead to upward pressure on bitcoin and ether prices. Furthermore, the support of market makers by ensuring liquidity means that investors can enter and exit positions more easily, potentially reducing volatility and encouraging more stable price growth of these digital assets.
The story continues
The approval and trading of ETNs on the LSE signals a growing acceptance and integration of digital assets into traditional financial markets. This integration not only adds a level of legitimacy, but also attracts more institutional and retail investors, further driving market growth.
The ETNs will not be immediately available to retail investors, only professional investors will be able to access them. However, this phased approach by the UK’s Financial Conduct Authority (FCA), starting with professional investors, paves the way for eventual wider access, which could catalyze further adoption and investment in cryptocurrencies.
Watch: What is a bitcoin spot ETF and why has it triggered a cryptocurrency rally? | Focus on the future
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