The UK's cryptocurrency exchange-traded notes (ETNs) have had a disappointing start, with a total trading volume of just $500,000 since their launch on the London Stock Exchange (LSE) on May 28. This underwhelming performance is largely attributed to the restriction that only professional investors can trade these cryptocurrency products, unlike in the US where retail investors can also participate.

The limited market appeal has resulted in a paltry $500,000 in total trading volume, a far cry from the daily trading volume of $2.5 billion recorded by the US spot Bitcoin ETF on June 7. The ETNs, backed by Bitcoin and Ether, were approved by the Financial Conduct Authority (FCA) but have failed to garner significant interest.

21Shares, WisdomTree, and Invesco are the primary issuers of these ETNs, with WisdomTree accounting for the majority of the trading volume. However, even the combined turnover for all these ETNs is a meager $504,880 as of June 6, with WisdomTree accounting for 59% and 21Shares making up the remaining 41%. Invesco's products have seen no trading activity, a stark contrast to the thriving US spot Bitcoin ETF market.

The strict criteria for listing these ETNs on the LSE, including physical backing, non-leveraging, and exposure only to Bitcoin or Ether, have not been enough to attract substantial trading volume. 21Shares offers four Bitcoin and four Ether-backed products in the UK, while WisdomTree manages two Bitcoin and Ethereum ETNs, and Invesco has two Bitcoin-backed products. Despite this, the products are struggling to gain traction, with 21Shares' Ethereum products being the sole exception, accounting for 76% of its trading volumes.

Professional traders prefer to operate over-the-counter (OTC), buying and selling financial instruments directly with another party outside formal exchanges like the LSE or via the most liquid exchange available. This preference has contributed to the lackluster performance of the ETNs on the LSE. The FCA's decision to open the UK market to professional investors is seen as a positive step, but the low trading volumes were expected, given that these products are only available to professional and institutional investors.

The cross-listing of these products on multiple exchanges across different countries or regions has also contributed to the limited trading activity. Despite this, 21Shares believes that opening these products to retail investors could be a "game changer" for the market. The company's Ethereum Staking ETPs have seen around 57% more trading volume than its Core Ethereum product without a staking yield, indicating a potential demand for such products among retail investors.

In conclusion, the UK's entry into the cryptocurrency ETN market has been disappointing, with limited trading volume and lack of interest from investors. The restriction to professional investors and the preference for OTC trading have contributed to this lackluster performance. However, there is still hope that the market will gain momentum if retail investors are allowed to participate, and the issuers continue to offer innovative products that meet the evolving needs of the industry.