Friday, February 28, 2020

How To Invest In Bitcoin With An ETN

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British investors who want to buy into the Bitcoin bonanza have few choices about where to go to make a secure purchase.

But one UK online fund supermarket has opened the door on Bitcoin investing by offering access to the market for SIPP and brokerage accounts.

Investors can buy into exchange traded notes from Swedish firm XBT Provider through the Hargreaves Lansdown portal.

Laurent Kassis, an ETF trading consultant and interim managing director of XBT Provider, said: “This is good news for the world of bitcoin and UK investors.”

Despite the volatility in the Bitcoin market, the ETN has drummed up support from some experts.

The virtual currency is trading at US$4,368 – slightly down from an all-time high of $4,950 which was reached on September 1.

Bitcoin’s dubious reputation

Shares in the Bitcoin ETN are trading for around 174 Swedish Krone – equivalent to £16.45.

The ETN tracks the price of Bitcoin.

In 2015, the firm issued a tracker that became the first bitcoin-based security available on a regulated exchange when it listed in Stockholm.

Bitcoin has a dubious reputation as a reliable asset after years of bad publicity linking the virtual currency with crime and fraud.

The untraceable nature of Bitcoin has allegedly eased the financial dealings of criminals and terrorists, while several Bitcoin brokers have gone to the wall after losing huge sums of the currency to thieves and hackers.

Few governments or central banks recognise Bitcoin as a legal currency, leaving the sector largely unregulated.

ETN tax and risk

This also means that any gains on trading the currency are taxable – typically under a nation’s capital gains tax laws.

An ETN differs from an ETF, with the former a contract based on senior debt and an ETF represent a stake in the underlying asset.

Barclays Bank is the leading backer of ETNs, but this still leaves the notes open to credit risk as they are not supported by a central bank.

ETNs track the value of Bitcoin, less 75 basis points a year.

Unlike ETFS which involve little credit risk, if the backing for ETNs crumbles, the holder could lose some or all the promised return.

Find out more about the XBT Provider ETN

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