The listing follows the FCA’s decision to allow exchanges to create a UK listed market segment for crypto asset-backed Exchange Traded Notes (cETNs), available for professional investors only.

The Fidelity Physical Bitcoin ETP, which tracks the price movement of the world’s leading cryptocurrency and is 100 per cent physically backed by bitcoin, was launched in February 2022, listing first on the Deutsche Börse Xetra and the SIX Swiss Exchange. The firm writes that it aims to represent a convenient and cost-effective way for investors to gain exposure to bitcoin. Fidelity Digital Assets (FDA) acts as custodian.

In February 2024, Fidelity cut the Ongoing Charges Figure on the product from 0.75 per cent to 0.35 per cent, writing that this makes it a competitively priced ETP available to professional investors.

Stefan Kuhn, Head of ETF & Index Distribution, Europe, Fidelity International, comments: “Approval of the first spot bitcoin ETFs in the US has spurred interest from investors in cryptocurrencies all over the world. The FCA’s decision to authorise crypto asset-backed Exchange Traded Notes for professional investors is a positive development and reflects the increasing acceptance and demand of digital assets offered through a secure and regulated exchange.

“The Fidelity Physical Bitcoin ETP offers professional investors in the UK an institutional quality solution to enter the market in a familiar, simple and secure way.”

Its study with organisations already invested in the sector found 77 per cent expect the flow of funds into bitcoin ETFs to increase over the next 12 months with 13 per cent predicting dramatic increases.

The institutional investors and wealth managers questioned in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates who collectively manage around USD1.7 trillion in assets agree the mainstream adoption of crypto ETFs will have wider and more profound impacts on the sector.

The firm writes that bitcoin ETFs are seen as delivering a range of benefits including lower costs, increased liquidity within established regulatory frameworks and reporting as well as enabling institutional investors to avoid the complexities and risks associated with self-custody.

Institutional investors and wealth managers questioned all agreed that the widespread adoption of bitcoin ETFs is putting pressure on regulators to put comprehensive regulatory frameworks and standardised definitions and classifications in place with 29 per cent strongly agreeing.

However, the research shows arbitrage-focused hedge funds are regarded as the most attractive way for investors to gain exposure to digital assets ahead of ETFs or ETPs.

The latter, in turn, are seen as more attractive than a passively held diversified portfolio of digital assets or an actively managed diversified long-only portfolio of digital assets. The approach rated fifth in the research was an actively managed diversified long/short portfolio of digital assets.

Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, says: “The wider implications of the launch of crypto ETFs are that they helped legitimise the asset class, driving interest to both directional products such as ETFs, as well as the more sophisticated market-neutral strategies via specialised active managers.”

ETH and BTC are the tokens used to pay transaction fees and to reward those running blockchain software.  BTC is referred to as an inflation hedge or digital gold. ETH could be digital oil, fuel that enables Digital Apps (dApps).  Ethereum dApps enable tokenisation, financial infrastructure, games and even social media networks.  Applications also enable Ethereum’s use as a backbone for blockchains known as Layer 2s.  These are designed around specific requirements such as speed, then use Ethereum as a secure, settlement layer between chains and institutions.

The market capitalisation of cryptocurrencies has grown over the last five years, however they are still volatile.  Bitcoin can be considered digital gold… for the brave.  Physical gold still has substantially lower volatility.  Despite the differences in the blockchains, they are still highly correlated in terms of price. Changes in BTC price currently drive the crypto market as a whole. 

Issuance of new tokens is one area of difference and is defined in the software of each blockchain rather than by committees.  Bitcoin issues a fixed number of BTC “rewards” every block paid to “miners” operating the network.  Initially 50 BTC per block, the software enforces a 50 per cent reduction every 210,000 blocks (~4 years).   From July 2024, the reward was 3.125 BTC and will halve again in 2028.

Ethereum requires “Validators” to provide an ETH “Stake”. Rewards are issued in proportion to the stake.  Ethereum also removes a portion of transaction fees from circulation.  Block rewards increase new ETH, transactions remove ETH from circulation.  Since 2022 the supply of ETH has reduced by 335k ETH. 

Validators running the Ethereum software earn rewards (~3.071 per cent) however this is complex and has created a new industry where technical service providers run the software on behalf of holders in return for a small percentage of the rewards.  This provides an opportunity for all ETH holders to earn yield.

Longer term, staking maybe a differentiator between ETH ETFs.  The US issuers initially had this as part of their products but for now, it has been removed.

There are big differences in energy usage across blockchains.  Ethereum relies on the Validators ETH Stake as a security guarantee, but bitcoin Miners can only process transactions if they commit computation to the network.  Computation makes it expensive for a malicious actor to disrupt the network.  For both blockchains, a substantial economic investment is needed by the Software Operators. With Ethereum, the investment is ETH, with bitcoin it is in computation which requires energy.

Gold does not need new functionality in order for it to be considered valuable.  Many bitcoin developers believe the same – bitcoin does one thing well and no more, but that is the point.   In contrast, Ethereum has a roadmap with releases introducing new functionality every six months.

The success and adoption of blockchains is driven by the software ecosystem.  An annual report published by Electric Capital found over 16,000 Ethereum developers, more than any other Blockchain by a very large margin.  Bitcoin was found to have only 1,853 developers.

Accounts holding more than USD100 have grown across both blockchains with a sharp uptick in recent months.  Ethereum transactions are steadily growing and account for around four times that of bitcoin.  If Ethereum “Layer 2” blockchains are included, the transaction count is far higher and growing.

As the growth and adoption of cryptocurrencies continues, we are seeing governments around the world take a wide spectrum of regulatory actions.  El Salvador became the first country to adopt bitcoin as a legal tender; they have since been followed by other countries.  In contrast, cryptocurrencies are subject to different types of bans.  As the assets become more widely adopted and understood, hopefully regulation will follow.

A more mundane risk is the displacement of ETH and BTC as the dominant cryptocurrencies. Given how embedded bitcoin is in the public consciousness, this maybe more of an issue for Ethereum.  However, Ethereum is well established as a platform for dApps and has by far the largest ecosystem.  This combined with the nature of software enables Ethereum to include the best innovations found in competing platforms.

Cryptocurrencies are software and so there is always the risk of defects.  There are however mechanisms in place to reduce this risk, for example Ethereum is run using multiple versions of the software developed by different teams.

On the surface bitcoin and Ether are very similar assets currently with a high degree of price correlation.  There are however distinct differences that may, in the longer term, cause a divergence in their price.  Ethereum has the potential for a big increase in adoption across a wide variety of sectors whilst the narrative around bitcoin as a store of value and hedge against inflation is growing.   Diversification across both assets maybe the best strategy.

Bullish plans to invest in CoinDesk’s global expansion and the growth of the media, events, and indexing businesses. CoinDesk will continue to be led by Kevin Worth and the existing management team and operate as an independent subsidiary within Bullish. Terms of the transaction were not disclosed.

“With its acclaimed editorial coverage, premier events and market-leading data and indices, CoinDesk continues to shape the global crypto and blockchain ecosystem,” says Tom Farley, CEO of Bullish. “Bullish will immediately inject capital into several of CoinDesk’s most exciting growth initiatives which will power the launch of new services, events and products. We also want to express our unwavering support for CoinDesk’s commitment to journalistic independence.”

“We are thrilled to partner with Bullish and begin the next phase of CoinDesk’s growth,” says Kevin Worth, CEO of CoinDesk. “With renewed momentum in the crypto economy as well as investment from Bullish, we look forward to capitalising on the many opportunities ahead for product development and expansion. I will always be grateful to Barry for taking a risk on CoinDesk and having the faith in me and our team to build a meaningful and everlasting business that will continue to support the future of digital assets.”

“I’m incredibly proud of CoinDesk’s growth and development over the last seven years, having transformed itself from a small blog about bitcoin into an award-winning media and events company and the most trusted information platform for digital assets,” says Barry Silbert, Founder & CEO of Digital Currency Group. “The team has built a multi-faceted global business with tremendous future potential and we look forward to watching them take CoinDesk to the next level in partnership with Bullish.”

CoinDesk Indices was a winner in this year’s ETF Express US Awards

The Laser Digital Bitcoin Adoption Fund is designed to provide long-only exposure to bitcoin while being one of the most cost effective and secure investment solutions. To secure the fund’s assets, Laser Digital writes that it will use Komainu, which was founded in 2018 by Nomura, Ledger and Coinshares and delivers a regulated custody solution for institutional digital asset investors. The Fund is a segregated portfolio part of Laser Digital Funds SPC, a Segregated Portfolio Company registered as a mutual fund pursuant to section 4(3) of the Mutual Funds Act with CIMA (Cayman islands Regulatory Authority).

Laser Digital Asset Management is led by Sebastian Guglietta, who was previously Nomura’s Chief Scientist Officer, prior to which he was a Portfolio Manager and Senior Scientist at Brevan Howard. Sebastien has over 25 years of experience in the domain of systematic investment strategies, derivatives and macro trading. Fiona King, Head of Distribution, joined Laser from Nickel Digital Asset Management, where she was Managing Director and Global Head of Institutional Business and prior to this she was at Bank of America Merrill Lynch responsible for their UCITS alternative platform.

On launching the fund, Sebastien Guglietta, Head of Laser Digital Asset Management comments: “Technology is a key driver of global economic growth and is transforming a large part of the economy from analogue to digital. Bitcoin is one of the enablers of this long-lasting transformational change and long-term exposure to bitcoin offers a solution to investors to capture this macro trend.”

Fiona King, Head of Distribution, Laser Digital Asset Management adds: “We’re delighted to now launch our Bitcoin Adoption fund, which allows institutional investors a secure path into digital asset investment that is backed by established finance, with the highest levels of risk management and compliance.”