The launch of the UK’s cryptocurrency exchange-traded notes (ETNs) on the London Stock Exchange (LSE) has been nothing short of a disaster compared to the volume of ETFs traded in the US. Since their debut on May 28, the total trading volume has been a pitiful $500,000.
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In stark contrast, the US spot Bitcoin ETF recorded a daily trading volume of $2.5 billion on June 7. Clearly, the UK’s entry into the crypto ETN market is falling flat. The ETNs, backed by Bitcoin and Ether, were approved by the Financial Conduct Authority (FCA) but have seen minimal interest.
Crypto ETNs see poor performance
Only professional investors can trade these cryptocurrency products, and this restriction is proving to be a major barrier. One of the issuers, 21Shares, believes that opening them to the retail market could be a “game changer.”
21Shares offers four Bitcoin and four Ether-backed products in the UK. Meanwhile, WisdomTree manages two Bitcoin and Ethereum ETNs, and Invesco has two Bitcoin-backed products. To be listed on the LSE, these ETNs must be physically backed, non-leveraged, and offer exposure only to Bitcoin or Ether. Despite these strict criteria, the products are failing to attract significant trading volume.
As of June 6, the combined turnover for all these ETNs is just $504,880. WisdomTree accounts for 59% of this trading volume, while 21Shares makes up the remaining 41%. Invesco’s products have seen zero trading volume. For context, US spot Bitcoin ETFs saw daily $2.5 billion in trading volume.
WisdomTree’s four UK crypto products have performed comparatively better. However, within 21Shares’ offerings, the Ethereum products have been more successful, making up 76% of its trading volumes. Specifically, 21Shares’ Ethereum Staking ETPs have seen around 57% more trading volume than its Core Ethereum product without a staking yield.
Professional traders prefer to operate OTC
Regarding the average daily spread, 21Shares’ products maintain the tightest levels among the crypto ETNs on the LSE. The spread is the average difference between the bid (buy) price and the ask (sell) price of an ETN over a trading day, which is very important for understanding the cost of trading and the liquidity of these products.
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21Shares noted that professional traders typically trade over-the-counter (OTC), buying and selling financial instruments directly with another party outside formal exchanges like the LSE or via the most liquid exchange available.
The FCA’s decision to open the UK market to professional investors is a “huge step in the right direction.” However, since these are cross-listed products, which are listed and traded on multiple exchanges across different countries or regions, the low trading volumes were “in line with expectations,” according to 21Shares UK Head Alex Pollak.
“These cross listings saw little initial trading,” said WisdomTree Head of Capital Markets Michael Delew. He added that this was not unexpected given that the products are only available to professional and institutional investors.
Cryptopolitan reporting by Jai Hamid
