Breaking New Ground, The Responsible Way
As of Friday morning, we’re breaking new ground again by publicly introducing the world’s first Litecoin (LTC) and EU’s first XRP-tracking exchange-traded products (ETPs) — available at trading open tomorrow (April 5th) on the regulated Nordic Growth Market (NGM) exchange.
This marks an exciting new chapter in XBT Provider’s journey, and expands our lineup to eight ETPs comprising passive trackers for four underlying digital assets (BTC, ETH, LTC and XRP) across two traditional exchanges.
Logistically, this was no easy feat. As with all of our products, these new ETPs had to clear many hurdles in order to make it to market. This was only made possible thanks to numerous internal and external partners, to whom I’m sincerely grateful for their collaborative efforts.
On that note — I’d like to give a special thanks to both Laurent Kssis, Managing Director of XBT Provider and 20+ year ETF industry veteran; and Jean-Marie Mognetti, one of my partners at CoinShares, both of whom worked tirelessly to make this a reality for investors.
I’d also like to say thank you, to our investor base. You continue to remind us that this is important work, and while at times it may be frustrating, in the end it is rewarding and well worth the effort.
In 2018, you named our Ether-tracking product the ‘Most Innovative Hybrid Product in Europe’ at the 14th Annual Global ETF Awards.
In 2019, you named our issuer the ‘Most innovative European ETP Provider’ at the 9th Annual ETFExpress Awards.
This praise is humbling, especially as both categories are occupied by ETF giants.
While these are positive signals and admittedly fun moments, the greatest recognition is seeing positive investor response to our products.
When we launched the Ether ETPs in 2017, the market responded with massive demand — driving AUM well over $100M within the first two months of trading. Notably, however, this was in the middle of a very bullish market.
So, when it became obvious that there was investor demand for more products, and an XRP product made it to the top of that investor wishlist (closely followed by LTC) — we began the internal debate about whether this was in our mission brief; or if it may be a dangerous distraction.
To clarify that last statement — in my view, CoinShares’ mission is like that of NASA or other space agencies in many ways. We aim to provide interested parties with:
- Fact-based research for a largely unknown and uncharted frontier;
- High-caliber [investment] vehicles that must not break once in flight (said differently — they track prices accurately and have enough volume in the product once listed);
- And more broadly, a pragmatic partner to identify areas that are concerning or unclear as we venture deeper into this new space.
Simply put, you cannot explore without taking risks — whether in crypto, space or any other new frontier. Yet for some educated speculators and/or adventurous spirits, the measured risk is worth taking.
(*Crypto Twitter: please feel free to turn this whole space analogy into a meme).
All of our products carry risk, but especially so in the case of XRP — as was pointed out countless times during internal discussions.
These new products represent a new set of risks that our investors may not be aware of, and are different in many ways from our existing offering.
With this context in mind, I think it’s important for us to share some of that debate as transparency is one of the guiding principles for our team.
Let’s start with a note from Christopher Bendiksen, our Head of Research:
The first step in evaluating XRP is to separate protocols from tokens.
For example: Bitcoin is a protocol for monetary value transfer. The Bitcoin protocol needs the bitcoin token to function.
Ripple is also a protocol for monetary value transfer, however, the Ripple protocol does not need the XRP token to function.
This is important. Notwithstanding Ripple Labs’ insistence that Ripple and XRP are different, we must keep in mind that a bet on XRP is not necessarily a bet on the success of the Ripple protocol.
With Bitcoin you are in for the whole package. Bitcoin the protocol cannot succeed or even function at all without bitcoin the token. This is not the case with Ripple and XRP.
Our products will give exposure to XRP the token, which makes the capabilities of the Ripple protocol more of a side note than a thesis driver since the protocol doesn’t need the token.
Other significant differences worth noting:
- All 100bn XRPs were created instantly, at zero cost, by a single entity, whereas bitcoins are expensive to generate and are created over time (max 21m) in a competitive environment
- Bitcoin transaction fees are paid to miners who redistribute the coins in the market, whereas XRP transaction fees (paid in XRP) are burned, reducing the overall XRP supply
- XRP’s long-term monetary policy is thus strictly deflationary (assuming you trust that no more XRP will be created); as it stands, Bitcoin’s monetary policy will remain inflationary until coin loss inevitably overtakes coin issuance, making it deflationary as well
- The monetary policy of bitcoin tokens is determined by the Bitcoin protocol and fully known and/or ‘auditable’ by all participants, whereas the day-to-day XRP monetary policy is de facto determined by Ripple Labs as a result of their ownership of more than half of all XRP tokens created
It’s easy to see how these protocols and tokens are fundamentally different and why it is extremely important to do extensive research.
A bit more on the controversial side, I’m also compelled to mention that Ripple Labs is currently party to a class-action lawsuit to determine if they broke securities laws by issuing and selling XRP to the public.
Jake Chervinsky has a great summary of the current status of that case on Twitter for those unfamiliar…
0/ The Ripple securities class action took a step forward this week, as the court set a schedule for roughly the next year of litigation.
Here's an update on where the case stands, what's next, and when we'll answer the question that never dies: "is XRP a security?"
— Jake Chervinsky (@jchervinsky) March 22, 2019
None of this discussion is meant to overshadow the importance of making these products available to investors who petitioned for them. Or to judge the asset.
Rather, it is meant to bring these new products to market with a sense of responsibility and transparency to current and prospective investors.
Ultimately, once we determine that a professional-caliber product is feasible — and it appears that customer demand exists to make a liquid market for trading the product — we owe it to investors to bring the product to fruition.
When we launched our Ether-tracking products in 2017, similar conversations were still happening around its regulatory status.
And of course bitcoin — which XBT Provider launched a tracker for in 2015 — has been declared dead more than 349 times over the last nine years (60+ of these declarations happened prior to the 2015 listing on Nasdaq), including many times by some of the biggest names in finance.
So, who are we to prevent exploration because it happens to occur within a polarizing part of the ecosystem?
One of the key virtues of Bitcoin, and one of the reasons I fight for it every day, is freedom of choice — a point I argued in my last blog post.
We are not here to shy away from controversy or obfuscate facts. We’re here to shine a light on them and stick to our mission. Our three guiding directives (as listed above) are in full play, as always:
- Our bi-annual Crypto Reports have included XRP coverage since 2017, and while they are a good starting point, we do recommend going beyond these. For bitcoin, Ether and Litecoin, we have full Asset Highlights which you can download on our website. We highly encourage you to do your own research (DYOR) before investing in any digital asset.
- We’ve worked hard to build and offer professional products on a regulated market, NGM — owned by one of the largest exchanges in Europe, Boerse Stuttgart.
- We are committed to providing open, honest perspectives on these assets and their role in the larger ecosystem. Pay attention to the news flow around the underlying assets, and we will continue giving you our unfiltered take.
To conclude, I began this letter by noting that this was a new chapter for us as both a company and an issuer.
As of the close of Q1 2019, we have experienced four continuous quarters of net inflows, to the tune of $90M+ invested— something I could not even say in 2017 at the height of crypto mania.
I’m hesitant to make a bullish or bearish call right now; but I can say that we are just getting started for 2019, plenty more exciting products in the works.
Stay tuned in the coming weeks to see what direction these may take…
Thank you again for your continued support. I speak for our entire team when I say that we genuinely and sincerely appreciate it.
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Digital assets and related technologies can be extremely complicated. The digital sector has spawned concepts and nomenclature much of which is novel and can be difficult for even technically savvy individuals to thoroughly comprehend. The sector also evolves rapidly.
With increasing media attention on digital assets and related technologies, many of the concepts associated therewith (and the terms used to encapsulate them) are more likely to be encountered outside of the digital space. Although a term may become relatively well-known and in a relatively short timeframe, there is a danger that misunderstandings and misconceptions can take root relating to precisely what the concept behind the given term is.
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Nothing within this Blog Post constitutes investment, legal, tax or other advice. This Blog Post should not be used as the basis for any investment decision(s) which a reader thereof may be considering. Any potential investor in digital assets, even if experienced and affluent, is strongly recommended to seek independent financial advice upon the merits of the same in the context of their own unique circumstances.
This information is only intended for sophisticated investors and is not intended to constitute an offer, solicitation or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. This document is not intended to constitute an offer to sell or a solicitation of an offer to purchase securities in the United States. The products have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States or to U.S. persons unless they are registered under applicable law or exempt from registration. XBT Provider does not intend to register the products in the United States or to conduct a public offer of securities in the United States.
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