Paris-based Melanion Capital has successfully introduced its bitcoin equities ETF on Euronext Paris.
Jad Comair, President & CEO of Melanion Capital.
The launch of the fund – the Melanion BTC Equities Universe UCITS ETF (BTC FP) – marks the first listing of a UCITS bitcoin-linked product in Europe.
The UCITS wrapper means that retail and institutional investors across the EU are able to invest in it with all the same regulatory standards and protections associated with a traditional UCITS ETF.
The fund tracks the Melanion Bitcoin Exposure Index, which, according to its creators, has up to 90% correlation with the price of bitcoin.
The index was designed in-house by Melanion and is administered by Germany indexing fintech BITA.
The methodology underpinning it aims to bridge the gap between equities and bitcoin by capturing the performance of a select universe of companies listed on regulated US, Canadian and European exchanges that exhibit the highest correlation and revenue exposure to bitcoin.
To be eligible for inclusion, a company must either derive at least 50% of its revenues from crypto asset management and trading, crypto banking and associated services, crypto mining and provision of crypto mining hardware, or blockchain technology, or, alternatively, must hold cryptocurrency assets on its balance sheet, either as cash and receivables or as investment assets, of at least $10 million.
Companies must also have a market capitalisation in excess of $100m and an average daily traded value of at least $500,000.
Index constituents are weighted according to their beta coefficient with bitcoin, capped based on liquidity, and rebalanced and reconstituted on a quarterly basis. The number of constituents in the index is restricted to 30.
Beta coefficients are calculated as the covariance between the constituent weekly returns and the bitcoin weekly returns divided by the variance of bitcoin weekly returns.
Notable constituents currently include Argo Blockchain (8.7%), Bit Digital (6.4%), Marathon Digital (6.3%), Riot Blockchain (5.8%), Hut 8 Mining (5.2%), Bitfarms (4.9%), HIVE Blockchain Technologies (4.9%), Galaxy Digital (4.8%), MicroStrategy (4.6%) and BIT Mining (4.4%). (Index weights as of September month-end).
Jad Comair, CEO of Melanion Capital, said: “There is a very strong demand from institutional investors in Europe to gain a seamless and trusted exposure to bitcoin, which is why we have launched our ETF proposition.”
The asset manager has expressed a desire to roll out the ETF on other exchanges.
“We are also preparing listings in Frankfurt, London, Milan and Amsterdam, then possibly in other places depending on interest,” said Comair in a pre-listing interview with French newswire Finascope.
“The procedures will take a few months. The timetable does not depend on us, but rather on the technical and administrative intricacies of the different countries, with regulators, stock exchanges and intermediaries such as custodians.”
GHCO has been appointed liquidity provider to the ETF. As market maker and authorized participant, GHCO will ensure that institutional investors have access to ample liquidity and are quoted tight spreads.
Dan Izzo, CEO of GHCO, said: “This launch marks yet another significant step in the rise of regulated crypto-related financial products. As digital assets continue to mature as an asset class, we expect to see more demand for these kinds of products.”
The ETF has a total expense ratio of 0.75%.