What is a crypto ETP?
Exchange-traded products (ETPs) are a family of securities tracking the value of one or more underlying assets. ETPs can be traded on regulated exchanges in the same manner as company stocks and shares.
Cryptoasset ETPs give investors the opportunity to get exposure to digital assets through traditional financial instruments. This means investors don't have to turn to unregulated venues to acquire cryptoassets or take responsibility for their maintenance and security.
ETPs come in three forms: exchange-traded funds (ETFs), exchange-traded commodities (ETCs), and exchange-traded notes (ETNs).
In financial markets, ETFs mirror the price of a basket of securities like the NASDAQ so investors can diversify their portfolios. Similarly, cryptoasset ETFs comprise of digital assets, like Bitcoin or Ethereum, that are weighted on the basis of characteristics like market cap or supply.
ETNs are unsecured debt securities that track stocks, bonds, and commodities indices. In their most typical form, ETNs don't hold any of the underlying assets they derive their nominal value from. ETNs can be compared to credit notes issued by banks as investors must rely on the goodwill of borrowers to gain from their investment.
ETCs offer investors direct exposure to physical commodities like copper or cryptoassets like Bitcoin. ETCs are debt instruments like ETNs, but unlike their sister product, they represent a direct investment by the issuer in an asset.
A range of cryptoasset-tracking ETPs can be found on regulated exchanges around the world. ETC Group's Physical Bitcoin ETP ( BTCE) is one of the largest Bitcoin products in Europe by AUM.
It is 100% physically backed and does not engage in any lending; thereby minimising any counterparty risk associated with the product.
What is a crypto ETF?
In financial markets, ETFs mirror the price of a basket of securities like the NASDAQ so investors can diversify their portfolios. Similarly, cryptoasset ETFs comprise of digital assets, like Bitcoin or Ethereum, that are weighted on the basis of characteristics like market cap or supply.
Financial products like ETPs can differ widely depending on the jurisdiction in which they are issued: for example in Europe versus the US. There may be variations in investor protection rights depending on the market regulator, for example those overseen by the European Securities Market Authority as opposed to the SEC.
These differing legal structures make the whole scenario difficult to grasp even for experts. For example, what are called gold ETFs in the US are normally trusts, while gold ETFs in Europe are usually debt instruments.
European ETPs (which include ETC Group Cryptocurrency ETCs), even though they offer exposure to financial assets very similar or identical to what a US ETF may offer, are not registered under the US Securities Act of 1933. As such they can't be offered to US investors.
This is true in the opposite direction: such regulatory restrictions make it difficult for US investors to purchase European-regulated products.
What is a crypto ETC?
ETCs (Exchange Traded Commodities/Currencies or Exchange Traded Cryptocurrencies) are a type of financial instrument representing a commodity, such as oil, lumber, coffee, precious metals like gold and silver, or cryptocurrencies like Bitcoin or Ethereum.
Like ETFs, ETCs passively track the price performance of the underlying assets they refer to.
ETCs are debt instruments, but unlike ETNs, they represent a direct investment by the issuer in the commodity itself (or derivatives, like futures contracts in the commodity). So: ETCs have to buy and hold physical gold, oil, lumber or Bitcoin. In this way they are considered much safer than ETNs. As with ETFs, issuers sell shares in the ETC to investors, and shareholders own a piece of the ETC, but not the underlying commodities themselves.
ETC Group coined the term ‘Exchange Traded Cryptocurrencies', because like traditional gold or oil ETCs they are 100% collateralised: that is, they hold 100% of the assets that they represent on the market.
How can I buy a crypto ETP?
ETC Group's Physical Bitcoin ETP is listed on a number of regulated exchanges around Europe like Germany's Deutsche Börse's Xetra – the continent's market leading venue in ETP trading. Cross listings happen regularly on multiple major European exchanges including SIX Swiss Exchange, Euronext, or Vienna Stock Exchange. The ETPs are tradable through investor's regular bank or brokerage accounts. In case you cannot find a product on your platform, please contact distribution@etc-group.com.
Important information:
This article does not constitute investment advice, nor does it constitute an offer or solicitation to buy financial products. This article is for general informational purposes only, and there is no explicit or implicit assurance or guarantee regarding the fairness, accuracy, completeness, or correctness of this article or the opinions contained therein. It is advised not to rely on the fairness, accuracy, completeness, or correctness of this article or the opinions contained therein. Please note that this article is neither investment advice nor an offer or solicitation to acquire financial products or cryptocurrencies.
Before investing in crypto ETPs, potentional investors should consider the following:
Potential investors should seek independent advice and consider relevant information contained in the base prospectus and the final terms for the ETPs, especially the risk factors mentioned therein. The invested capital is at risk, and losses up to the amount invested are possible. The product is subject to inherent counterparty risk with respect to the issuer of the ETPs and may incur losses up to a total loss if the issuer fails to fulfill its contractual obligations. The legal structure of ETPs is equivalent to that of a debt security. ETPs are treated like other securities.
