Crypto Carnage Puts Bitcoin Tracker’s Plan for Basket on Hold
(Bloomberg) — The creator of the first exchange traded Bitcoin tracker has called a halt on launching a basket of cryptocurrencies to trade on after splits in the blockchain caused uncertainty over what to include.
XBT Provider AB was never able to launch an exchange traded product based on a basket as planned late last year. It wants to wait and see which way the cryptocurrency community moves before acting, according to Laurent Kssis, the company’s chief executive officer.
Stockholm-based XBT “didn’t have a clue” when it got the regulatory clearance from the Swedish financial supervisory authority back in May about the so-called “forks” that had developed, said Kssis.
“It’s important to ask how the community is responding to the split and who’s going to support one asset versus the other,” said Kssis. “If we get it wrong, these assets will drop and if they’re part of the basket we can’t go back because it’s in the final term-sheet.”
A fork happens when the blockchain that a cryptocurrency is based on splits into one underlying and one dominant asset. This can happen due to security upgrades or hacking, among other things. While a soft fork can be made compatible with the older version, a hard fork can not.
“Hard forks are indicative of some of the primary issues in cryptos pressuring prices,” said Mike McGlone, a strategist at Bloomberg Intelligence. “The overall issue is rapidly increasing crypto supply and negative signals for potential institutional investors of how still nascent the market is.”
Cryptocurrencies have continued their slide in 2019 after losing about $500 billion in market value last year, according to data from CoinMarketCap.com. The plunge took hold as widespread adoption failed to materialize, funding from initial coin offerings dried up and profitability of miners, whose servers support Bitcoin network’s operations, collapsed. The total market capitalization is now about $120 billion.
“Time alone is a test of the strength and the viability of the asset,” said Kssis.