The firm HANetf has brought forward what it describes as the first currency-hedged cryptocurrency exchange-traded commodities, opening up a means for European investors to purchase bitcoin while shielding themselves from exchange-rate losses.
Both GBTC and EBTC trade on major exchanges: the pound-hedged GBTC is listed on the London Stock Exchange, and the euro-hedged EBTC appears on Xetra and Euronext Paris. HSBC handles the currency protection for both instruments.
These ETCs aim at long-term bitcoin investors worried about dollar weakness, giving them cryptocurrency exposure while sparing them the need to handle custody themselves. The products are built to tackle a core feature of bitcoin that affects gold too: both assets are nearly always priced in U.S. dollars, so investors in places like Europe and beyond end up taking on dollar exposure whenever they buy BTC.
What the ETCs actually do
ETCs function much like ETFs, except they offer exposure to a single commodity or commodity group instead of a broad portfolio. In contrast to the United States, where ETFs can track a wide range of assets, ETFs operating within the European Union and U.K. must maintain a diversified basket of holdings. ETCs step into that role by tracking just one item, in this case bitcoin.
The London Stock Exchange hosts HANetf’s Arrow Bitcoin GBP Hedged ETC (GBTC). Its twin instrument, the euro-denominated EBTC, trades through Frankfurt’s Xetra and Euronext Paris. Each is built to reduce the influence of U.S. dollar swings on bitcoin’s value.
These products lock in the value of the dollar part of the investment. So even if the dollar weakens against the pound or the euro, the investor’s share of the bitcoin stays steady instead of shrinking along with the dollar. The goal is to serve investors who want long-term bitcoin exposure but may be worried about potential dollar weakness.
Why currency hedging matters
In traditional finance, currency hedging is an established practice, and it has already been applied to other assets within Europe. In Europe, currency-hedged gold ETCs form a $23 billion asset class, which represents roughly 13% of the gold ETC market there. The products offered by HANetf cover the euro, pound and Swiss franc.
The logic behind the bitcoin version is the same. Bitcoin’s price is almost always measured in dollars, and that means European investors who buy BTC are exposed to dollar movements even if they don’t intend to be. The hedged ETCs remove that exposure.
Digital asset investment vehicles known collectively as ETPs — which include ETFs, ETCs and ETNs — are a main way of bringing investors into crypto. These instruments let investors gain exposure to digital assets while avoiding the responsibility of managing custody of the underlying holdings.
The market for hedged crypto
The HANetf products are aimed at investors seeking long-term bitcoin exposure while guarding against possible dollar weakness. They are built for people more familiar with traditional finance (TradFi) products, who expect the same replication of features and services they use in that space.
The announcement introduces the ETCs as a new currency-hedged approach to the European crypto ETC market, with the company naming them “the world’s first currency-hedged crypto ETCs.”
What investors get
What sets these products apart is the hedging mechanism built into them. They are constructed to give investors exposure to bitcoin while reducing the impact of changes in the value of the U.S. dollar. That leaves the bitcoin price as the sole driver of returns for a European investor holding pound sterling or euros.
Investors get around the custody burden tied to purchasing bitcoin directly because these products take on the responsibility of storing the underlying asset for them.
The HSBC role
The bank HSBC is handling the currency protection for these offerings, according to the announcement. That statement describes the arrangement only as a guarantee of the fixed dollar worth of the investment, without explaining how the protection actually operates.
What this means for investors
These offerings target people who invest for the long haul and wish to hold bitcoin without taking on the risk of the dollar. They are also designed for those familiar with conventional financial instruments, who seek a crypto version of the same kind of product.
Hedging is not new to investing, but the hedged structure is a first for crypto in Europe. The existing market size for currency-hedged gold ETCs stands at $23 billion, which gives a sense of how large the space already is.
Key facts box
- GBTC: pound-hedged bitcoin ETC, listed on the London Stock Exchange
- EBTC: euro-hedged bitcoin ETC, listed on Xetra and Euronext Paris
- HSBC provides the currency hedges for both products
- Currency-hedged gold ETCs are a $23 billion asset class in Europe
- Approximately 13% of the gold ETC market in Europe
- HANetf provides products that hedge the euro, pound and Swiss franc
- The products are described as “the world’s first currency-hedged crypto ETCs”
The announcement presents these offerings as a logical addition to the current ETC market. The company’s case rests on a straightforward premise: since investors already hedge currencies for gold, there is no reason they cannot do the same for bitcoin.
The goods are on sale now. The risk tied to the dollar remains, but the protection is designed to cancel it out.
European investors face a choice about whether they will accept the proposal. There are already currency-hedged gold ETCs on the market, and these have grown to a substantial size. The crypto space is newer, but there is an existing desire for hedged exposure.
These exchange-traded coins are now the route for investors who want bitcoin without exposure to the dollar. It is still unclear whether they will come to define how people hold crypto going forward.
Source material: “How European investors can now buy bitcoin without taking on U.S. dollar risk,” CoinDesk.
Get the Notebook.
The day's best stories and every fresh verdict, in plain English, in your inbox by seven. One email a day, no more.