What is cryptocurrency?
Cryptocurrency is a form of digital currency secured by cryptography. Cryptography is a way of keeping digital currency secure. It means that only the person with the right information can access that currency. This information is known as a private key.
Instead of trusting a bank to store currency, users of cryptocurrency can send sums directly to each other, peer to peer. Transactions are recorded on a shared ledger known as a Blockchain.
Although Bitcoin was the first cryptocurrency to come into existence, there are now thousands of different cryptocurrencies.
How did Bitcoin come about?
Prior to Bitcoin’s creation, there were several attempts at creating a digital currency or cryptocurrency. Research started in the 1980s with experiments that gave rise to other digital banking innovations, such as debit cards.
The 1990s saw the creation of Digi-Cash and Z-Cash, both aimed to support easy transactions over the internet in the same way users send emails. However, this process of ‘emailing money’ created two digital copies, i.e. a double spend. Emailing a picture to someone creates two copies, one on the sender’s computer and one on the recipient’s.
When Bitcoin was developed, it solved that double-spending problem. It created a unique ability for individuals to transact online in a trusted manner for the first time. The advent of the Bitcoin blockchain meant that transactions were possible in real-time. Transactions are recorded on a secure ledger which cannot be edited.
The financial crash of 2008 spurred the efforts of Bitcoin’s early supporters. There was now a clear requirement for a system that could conduct transactions and allow users to transfer value outside of traditional banking.
Since Bitcoin’s invention, it has inspired thousands of other cryptocurrencies, each with its own unique benefits and features.
Who created Bitcoin?
The pseudonym Satoshi Nakomoto represents an unknown developer, or group of developers, who created Bitcoin in 2008. Nakomoto created Bitcoin as a decentralised network relying on a community of people to validate the transactions.
Nakomoto disappeared a few years after the launch of Bitcoin, and their true identity is unknown to this day.
Who controls Bitcoin?
Bitcoin is decentralised, not owned by any one person or company. It cannot be censored, controlled or manipulated by any single governing or centralised party.
A network of thousands of computers mathematically verifies all Bitcoin transactions—operators of the network vote for any changes in how the system works via a democratic consensus mechanism.
Is the Bitcoin Network secure?
The Bitcoin Network is spread across the globe, with more users joining all the time. As Bitcoin grows in popularity, the growing size of the network makes it increasingly difficult to be hacked.
Theoretically, it is possible, but a hacker would have to launch what is known as a 51% attack, i.e. accessing 51% or more of the computers governing the network. A hacker would also have to undertake this feat within a 10-minute timeframe before the system updates with a new transactional data set.
Is Bitcoin really being used?
Institutional adoption of Bitcoin is growing rapidly. Firms are incorporating digital assets into their treasury strategies as well as buying bitcoin for general investment accounts. The Fidelity Digital AssetsSM 2021 Institutional Investor Digital Assets Study found that seven in ten institutional investors surveyed expect to purchase or invest in digital assets in the future.
On the consumer side, recent partnerships with Visa, Mastercard, and PayPal are making it easier to use Bitcoin for payments. They are also supporting a wide variety of other cryptocurrencies too. People can use their crypto debit cards at over 200 million merchants in over 100 countries worldwide.
How does cryptocurrency differ from Fiat currency?
Government’s issues fiat currency for use in a particular geographical location. Cryptocurrency is borderless and used by anyone in the world over the internet.
Fiat currency is printed as physical notes and coins, produced in unlimited amounts decided by a particular government. Unlike Fiat currency, cryptocurrency does not have any physical notes or coins. It is stored as a balance in a digital wallet. Cryptocurrencies like bitcoin have a capped supply. For example, according to the Bitcoin Network’s rules, only 21 million Bitcoin will ever be created, expected to be mined by 2140.
How old is Bitcoin?
In 2008 the first whitepaper describing Bitcoin was published, with the protocol going live in 2009.
In May 2010, Laszlo Hanyecz was the first person to complete a Bitcoin transaction. He purchased two pizzas for 10,000 BTC, an investment that would be worth approximately US$542,874,000 today. This momentous occasion is known as Bitcoin Pizza Day, celebrated annually by Bitcoin enthusiasts.
How does Bitcoin work?
Bitcoin is underpinned by blockchain technology. The blockchain is a decentralised, electronic database, also called a distributed ledger—the ledger stores all the transaction details within the Bitcoin Network. The network consists of over a million computers called nodes. A node is a computer connected to other computers which follows rules and shares information. A ‘full node’ hosts and synchronises a copy of the entire Bitcoin blockchain.
Each node mathematically verifies each transaction which is then stored in a block. When a block becomes full of transactions, it gets appended to the Blockchain, an infinitely long history of all the previous transactions. You can think of blockchain as similar to a giant shared bank statement or transparent audit trail of all transactions since the Bitcoin Network began that everyone can access in real-time.
How is Bitcoin broken down?
Just as one pound is divided into 100 pennies, one Bitcoin is made up of 100 million satoshis or SATS. The name recognises Bitcoin’s founder, Satoshi Nakamoto.
What are the advantages of investing in Bitcoin?
Bitcoin has attracted interest around the globe as it provides an additional alternative to the traditional banking system. It allows people to send and receive money easily and with much lower commission fees.
Bitcoin is also a solid addition to an investment portfolio, providing diversity with the inclusion of this new digital asset class. Investment advantages include:
- Bitcoin can be a long-term investment: A finite amount of coins can ever be created or mined. Similar to gold, the more Bitcoin there is in circulation, the scarcer the asset, which influences the price.
- Bitcoin is financially inclusive: Bitcoin can be used by people worldwide who may not have access to any traditional banking infrastructure.
- Bitcoin is fully accessible: Bitcoin is borderless and operates 24/7 all around the globe.
What are the cost advantages of investing in an ETF?
In the case of digital assets, an Exchange Traded Fund (ETF) allows investors to buy and sell new financial instruments more easily. It offers investors the opportunity to integrate digital assets into their existing portfolios without requiring specialist knowledge or technical expertise.
There are two types of funds available on exchanges:
- A closed-end fund or trust is comprised of a fixed number of shares. Fund shares can trade at a premium or discount to the price of the underlying digital assets. Unit trusts are not traded on traditional regulated markets and typically have high fees. Lengthy notice periods for liquidating funds are common.
- An open-ended fund, like an ETF, can create additional units for investors by buying more of the underlying asset. Underlying assets are priced in real-time, with the ability to buy and sell at any time. Open-ended funds have the advantage of being regulated and insured, making them more secure for investors.
ETFs provide a safe solution to invest in new financial instruments with ease.
What is the difference between an ETF and other exchange traded products?
There are several exchange traded products which allow investors to trade cryptocurrencies. For example, trusts, leveraged debt tracker funds, Exchange Traded Notes (ETN) and Exchange Traded Commodities (ETC) are all commonly grouped as Exchange Traded Products (ETP).
There are four main areas where ETFs differ from ETPs:
- Structure: ETFs trade like any other equity-like instrument, whereas other products are made up of derivatives that can be leveraged, or lent. This leads to significant counterparty risk. The Jacobi Bitcoin ETF cannot be leveraged, or lent and cannot use derivatives like other exchange traded products.
- Settlement: ETFs are cleared and settled into a Central Securities Depository. ETNs and other ETPs are not centrally cleared and are often leveraged as debt instruments.
- Regulation: The Jacobi Bitcoin ETF is a regulated product, traded through regulated bodies to keep investments secure. Other exchange traded crypto products are not regulated or governed and have no regulatory restrictions through the trading process.
- Liquidity: ETF prices are set in real-time and can be traded instantly on exchange. Other products like ETNs are often not priced in real-time. Firms can have redemption limitations making it difficult to exit investments quickly.
Some firms issuing ETNs have been using terms like ‘engineered like an ETF’ which may be misleading. At Jacobi Asset Management, transparency is a core component of our product development and market communication. We are delivering against our mission to provide trusted solutions underpinned by robust, regulated and well-understood frameworks.
Why invest in a Bitcoin ETF over investing in Bitcoin directly?
The Jacobi Bitcoin Exchange Traded Fund (ETF) is a regulated bitcoin product, wholly invested in Bitcoin.
Institutional, professional and sophisticated investors can now integrate Bitcoin into their portfolios, eliminating the hassle and risks of acquiring, transferring, securing and storing Bitcoin directly. As an open-ended Bitcoin ETF, Jacobi offers the simplest and safest place for institutional, professional and sophisticated investors to access Bitcoin.
Investing directly into any cryptocurrency requires specialist knowledge and technical expertise. With an ETF, investors no longer need to navigate the complexity of exchanges, wallets and keys. Like real-world wallets and keys, if these elements are lost, the investor risks losing access to their funds. Millions of dollars of Bitcoin have been lost due to misplaced wallets or keys.
When investing in an ETF, investors hold units, similar to investing in stocks and shares. The ETF stores Bitcoin independently through specialist registrars, adding a layer of security and insurance.
Do investors need a wallet or key to invest in a Bitcoin ETF?
Investors do not need a wallet or key to own units in the Jacobi Bitcoin ETF.
Jacobi Asset Management has consciously set out to create a walletless investment environment. We aim to provide a safe and simple option for institutional, professional and sophisticated investors to access this new digital asset class. Investors will gain exposure to Bitcoin’s performance, avoiding all acquisition, transfer, storage and security risks. Instead, investors can focus on the price of the underlying asset and their investment.
Will investors actually own the Bitcoin?
Investors will own units in the Jacobi Bitcoin ETF.
Jacobi Asset Management will then use the proceeds into the ETF to purchase Bitcoin. The Bitcoin is settled and securely stored by Fidelity Digital AssetsSM.
Why did Jacobi Asset Management start with a Bitcoin ETF?
Jacobi Asset Management’s mission is to champion a world where investors can simply and securely embrace the exciting opportunities of the digital economy without the associated counterparty and technology risks.
Bitcoin is the largest of all cryptocurrencies with the highest demand and the highest level of risk, so it is a natural place for us to start our journey. The Jacobi Bitcoin ETF is the only regulated Bitcoin spot ETF product in Europe.
We plan to launch additional crypto-backed funds to the Jacobi Asset Management family. The Bitcoin ETF is just the beginning.
How is the Jacobi Bitcoin ETF regulated?
The fund is authorised and regulated by the Guernsey Financial Services Commission (GFSC), the competent authority for the finance industry in the British Crown dependency of the Bailiwick of Guernsey.
The fund has also been approved by the The Dutch Authority for the Financial Markets (AFM) for distribution in the Netherlands and for listing on Euronext Amsterdam.
Where is the Jacobi Bitcoin ETF listed?
The Jacobi Bitcoin ETF has been approved to list on Euronext Amsterdam.
Who are the custodians of the Jacobi Bitcoin ETF?
Fidelity Digital AssetsSM has been appointed as the custodian for the underlying Bitcoin assets of the Jacobi Bitcoin ETF.
The U.K. Financial Conduct Authority granted Fidelity Digital AssetsSM registration for its digital asset custody and trade execution services. Fidelity Digital AssetsSM are on the permanent register. With this comes a money laundering regulations (MLR) license, meaning the FCA considers Fidelity Digital AssetsSM compliant with money laundering regulations related to crypto.
What is the level of protection for investors of the Jacobi Bitcoin ETF?
Investors will benefit from the same level of protection as any other ETF or security that is cleared and held in a securities depository. The Jacobi ETF units are held through highly regulated European CSD Euroclear. The underlying Bitcoin assets are custodied with Fidelity Digital AssetsSM, an enterprise-grade custody platform.
Who can invest in the Jacobi Bitcoin ETF?
The Jacobi Bitcoin ETF is available to institutional, professional and sophisticated investors only.
In the European Union / European Economic Area the Fund will only be sold to Professional Clients as defined in MiFID II.
What is the investment process?
There are two avenues for institutional, professional and sophisticated investors to access the Jacobi Bitcoin ETF:
Off-market through direct investment: Investors can register their details here to invest directly into the Fund.
On Exchange: The Jacobi Bitcoin ETF has been approved to list on Euronext Amsterdam.
Where are the ETF units settled?
All units in the ETF settle via ICSD. For more information consult your broker.
What are the fund’s charges?
Jacobi Bitcoin ETF carries a 1.5% total expense ratio. This covers management, administration and all operational fees including the cost of safe custody. All Jacobi Asset Management fees are completely transparent.
What price will be used to calculate the NAV of the ETF?
The Jacobi Bitcoin ETF will be using LUKKA pricing data, the firm responsible for creating the S&P Bitcoin Price Index.
OPUS fund services calculate the daily NAV.
What is the redemption penalty and lock up period?
There is no penalty for redeeming Jacobi Bitcoin ETF units. There is also no lock-up period involved in investing in the Jacobi Bitcoin ETF.
How do investors redeem their investment?
Jacobi Bitcoin ETF units can be sold in real-time when listed on-exchange.
Please contact Jacobi Asset Management at [email protected] to redeem off-exchange.
What is the minimum investment required?
There is a US$100,000 minimum for investors to access the Jacobi Bitcoin ETF.
What are the ETF identifiers?
The Jacobi Bitcoin ETF ticker: BCOIN
The Jacobi Bitcoin ETF ISIN: GG00BMTPK874
Can investors redeem ETF units for Bitcoin?
Jacobi Bitcoin ETF investors will only be able to sell Bitcoin ETF units back to USD.
Can investors obtain ETF units in other currencies?
ETF units are denominated in USD only.