What are the Advantages of Investing in BTCE over Directly Investing in Bitcoin?
An easier way to invest in cryptocurrency
Investing in BTCE is as simple as buying shares through your broker or bank. Unlike investing directly in Bitcoin, there is no need to engage with the technical challenges of setting up a cryptocurrency wallet to store Bitcoin. Your units of BTCE are safely held with your broker or bank, thus removing the risk of losing your investment due to a lack of knowledge of how cryptographic keys work
Invest in Bitcoin on a regulated exchange
BTCE is traded on XETRA, one of the largest exchanges in Europe. As Deutsche Börse´s XETRA is a regulated exchange, this means that investors can trade with confidence knowing that all market participants are strictly vetted and carefully monitored to prevent market abuse. The alternative is to buy Bitcoin on cryptocurrency exchanges, many of which are unregulated or do not have as strict security and compliance standards.
The issuer has partnered with world-class liquidity providers (LPs) and authorised participants (APs) to ensure there is ample liquidity, resulting in tight spreads on-exchange and the ability to create or redeem units of BTCE on the primary market
Redemption for Bitcoin
BTCE can also be redeemed directly for Bitcoin. As an additional layer of protection for investors, every redemption transaction must be confirmed by the issuer and a reputable third-party administrator to ensure that no Bitcoin can be misappropriated due to misconduct or negligence on of the part of the issuer.
The issuer stores the Bitcoin with BitGo Trust Company, a secure, regulated custodian purpose built for holding digital assets. Strict KYC and AML standards ensure that the provenance of all cryptocurrency in custody has been vetted.
What are the Risks of Investing in BTCE?
Setting up an account with a Bitcoin exchange can be a lengthy and time-consuming process;
Setting up a cryptocurrency wallet isn’t easy from a technical point of view and requires a steep learning curve for the uninitiated user;
Theft, fraud and loss of value, for example due to the loss of keys, can make it impossible to recover lost funds. There is no central authority to raise concerns with or to contact if you lose your keys or to reverse the transaction if you are the victim of fraud;
The market is fragmented, and the infrastructure is not as developed as traditional financial markets so participants face technical, legal and regulatory challenges as well as liquidity issues for large sized transactions.
Are there any Disadvantages to BTCE over Regular Bitcoin?
Bitcoin can be used to pay for goods and services electronically around the world. BTCE cannot be used to pay for goods and services as it is an investment tool, unless BTCE is redeemed for physical Bitcoin.
What is the Price Source used for BTCE?
No price source is needed as each unit of BTCE represents precisely 0.001 Bitcoin (at issuance date and before fees – see below).
Where is the Bitcoin Custodied?
The issuer, ETC Issuance GmbH, stores all Bitcoin at BitGo Trust Company, a leader in digital assets safe custody. Deposits are insured by Lloyds of London against hacking and white-collar crime up to the value of $100 million. BitGo is a regulated trust and all Bitcoin is stored air-gapped in cold storage in their vaults.
How is Liquidity Guaranteed?
The issuer has partnered with world-class liquidity providers (LPs) and authorised participants (APs) to ensure that ample liquidity is available on exchange (secondary market) and that investors can additionally create or redeem units of BTCE on the primary market as well.
How Is the ETC Regulated?
BTCE is a regulated financial instrument under MiFID II and is regulated in each jurisdiction where it is traded - for example in Germany it trades on Deutsche Boerse’s XETRA exchange and is regulated by BaFin (German Federal Financial Supervisory Authority). Bitcoin itself remains mostly unregulated in most jurisdictions
What Oversight and Governance is Embedded in BTCE?
BTCE has been engineered with the security of the bondholder in mind. When units of BTCE are created, the equivalence in Bitcoin is stored at a secure, regulated and insured custodian. Any transactions related to the creation and redemption processes are verified by an independent administrator. The administrator can only be replaced with the approval of the trustee. The trustee holds security interest over the assets in custody and in the highly unlikely case of Issuer default, would step in to make sure bondholder obligations are settled in a timely and orderly fashion.