- A crypto ETP trading on Switzerland’s Six Exchange has the highest turnover of any product
- The so-called Amun Crypto Basket ETP tracks 5 cryptos, including bitcoin and ether
An exchange traded product tracking five of the largest cryptos has become a darling among traders even as the market for digital assets continues to dump.
The so-called Amun Crypto Basket ETP began trading on Switzerland’s Six Exchange last week and it now has the highest volume of any exchange-traded product trading on the venue. To be sure, the price of the investment product is down 15% at $12.40 a unit, reflecting the bearish sentiment of the overall crypto market. It began trading near $13.80 a unit. Since mid-November, the market for digital currencies has shed more than $85 billion.
Still, its turnover of 425,000 CHF ($425,000) a day beats a number of products in silver, crude oil, and gold trading on Six. High volumes are typically a sign of investor enthusiasm in a given stock or financial-product. To be sure, those volumes would be considered paltry for larger exchange-traded products in the U.S. The SPDR Gold Shares ETF, for instance, clocks in an average daily volume of $987 million, according to ETF.com. As for Amun, the fact that volumes are so high could indicate that there was a lot of pent up demand for buying digital assets, according to market structure specialists who spoke to The Block.
The Amun Crypto ETP is designed to track an index based on 5 cryptos, including XRP, bitcoin cash, ethereum, litecoin, and bitcoin.
Richard Johnson, a market structure expert at Greenwich Associates, told The Block that trading firms looking to make an arbitrage trade between the ETP and the underlying spot market might be a catalyst behind the high volumes. Firms can take advantage of deviations between pricing of the derivative and the underlying market to make a profit. As the market for cryptos continues to crash, hedge funds and other investors are hard pressed to squeeze alpha out of the market in any way that they can. “This is another smart arb opportunity,” Johnson said.
A person familiar with the investment vehicle, said the makeup of investors is split 50/50 between retail and institutions, a sign that larger investors have an interest in the market.
Jane Street Financial and Flow Traders, two quantitative trading firms and liquidity providers, have become active traders of bitcoin, XRP, ether, bitcoin cash, and litecoin as authorized participants for the Amun Crypto ETP, according to a Bloomberg report.
The Amun Crypto ETP designed to hold the underlying cryptocurrencies on which its value is based. This structure requires authorized participants — in this case, Jane Street and Flow Traders — to supply the ETP with cryptocurrencies if it grows and offload assets if it shrinks.
Jane Street and Flow traders backed the product by purchasing a number of units of the product to provide initial liquidity, a process known as “seeding.” To clarify, neither Jane Street or Flow Traders has an equity investment in the firm behind the product. Both companies declined to disclose how much cryptocurrencies they are trading and how much money they have invested in Amun’s Crypto ETP. Currently, U.S. investors are unable to buy or sell the ETP, which is regulated by the SIX Swiss Exchange.
This post has been updated to clarify that the product began trading last week.