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The Relationship Between the NAV of a Bitcoin ETP and the Bitcoin Price

18 February 2021

 

We are often asked how the price of the VanEck Bitcoin ETN (exchange-traded note) relates to the price of bitcoin. After all, while bitcoin has reached an all-time high of around USD 52,400, the ETN is – as of 17 February 2021 - worth a far lower EUR 22.54.

Bitcoin price and NAV of VBTC

Bitcoin price and NAV of VBTC

Source: VanEck.

To understand this relationship, it is critical to understand what the price or net asset value (NAV) of an ETN represents:

“Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities, often in relation to open-end or mutual funds."1

In our case, the NAV per note is the amount of bitcoin we hold valued on a daily basis by the bitcoin “close” price, minus the liabilities (accrued management fee), divided by the number of notes outstanding.

Every price move of bitcoin (whether it is up or down) is perfectly reflected in the price movement of the ETN. If bitcoin’s price increases by 10%, the value of the note increases by 10% (less the daily accrual of the management fee); if bitcoin’s price decreases by 10%, the value of the note also decreases by 10% (less the daily accrual of the management fee).

As you can see from the chart, the NAV of the product moves in lockstep with the bitcoin price even though the starting value is lower. We chose to make the initial note value as low as possible so that the average investor would be able to afford it – while also allowing for bitcoins potential to decrease in value significantly (volatility). As of 17 February 2021, one note represented collateral of 0.000556556 BTC. Explained another way, in order to hold one bitcoin an investor needed to buy approximately 1,800 notes, worth EUR 22.54.


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This article originates from VanEck (Europe) GmbH, Germany. It is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck (Europe) GmbH and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this article. The article and opinions expressed are current as of the article’s posting date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. VanEck makes no representation or warranty, express or implied regarding the advisability of investing in securities or digital assets.

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No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

© VanEck (Europe) GmbH.

 

Important Disclosure

This is a marketing communication. Please refer to the prospectus of the UCITS and to the KID before making any final investment decisions.

This information originates from VanEck (Europe) GmbH, which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin).

The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice VanEck (Europe) GmbH, VanEck Switzerland AG, VanEck Securities UK Limited and their associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Brokerage or transaction fees may apply.

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