World's First Bitcoin Short Notes Allow Bears to Ride Big SwingsBy
Vontobel and Leonteq start short certificates on SIX Exchange
Move comes as bitcoin is trading at or near record highs
Bitcoin bears now have another way to bet on price falls.
Swiss structured products houses Vontobel AG and Leonteq Securities AG started separate products on Friday that allow investors to profit if the price of bitcoin tumbles. Not that it has tumbled much lately. Bitcoin is trading at a record high and has soared more than 700 percent this year.
But the new certificates could usher in more two-way price movement in what has largely been a one-way market so far. Intraday price swings of 10 percent or more are not uncommon in bitcoin trading.
The ability to go long and short paves the way for investors to “take advantage of bitcoin’s significant price swings,” said Garrick Hileman, research fellow at the University of Cambridge. “The lopsided cryptocurrency investment playing field, historically slanted in favor of long positions, is about to be leveled.”
The certificates, which will be listed on SIX Exchange AG today, come as the cryptocurrency starts to gain mainstream acceptance as a financial instrument after CME Group Inc., the world’s biggest exchange, said it would start bitcoin futures next month.
“The initial feedback has been extremely positive,” said Manuel Dürr, head of public solutions at Leonteq. “Clients do very much appreciate the possibility of choosing between a long or a short investment in bitcoin.”
Leonteq’s product has a two-month maturity, while Vontobel’s is longer, but in both versions investors can exit early like regular exchange-traded instruments.
The advantage of a mini-future certificate compared with a futures contract is the limited loss potential, Eric Blattmann head of public distribution of financial products at Vontobel, which will launch a short mini future on SIX Exchange on Friday.
“We have seen big demand for our long tracker certificate from investors interested in playing the upside potential of bitcoin, and now they have also the possibility to hedge their position or go short,” Blattmann said.