Exchange-traded products (ETPs) offer a regulated, low-cost gateway for investors to access cryptocurrencies without direct ownership. Since Sweden pioneered the first Bitcoin ETP in 2015, the market has expanded globally, now featuring ~180 products—a tenfold increase since 2020. This growth reflects rising institutional adoption and mainstream financial integration of digital assets.
What Are Crypto ETPs?
ETPs are exchange-traded financial instruments that track underlying assets. Three primary types exist:
- ETFs (Exchange-Traded Funds): Investment funds holding assets directly (e.g., Purpose Bitcoin ETF).
- ETNs (Exchange-Traded Notes): Unsecured debt securities tracking assets synthetically.
- ETCs (Exchange-Traded Commodities): Debt instruments backed by physical commodities (like gold or crypto).
Why Choose Crypto ETPs?
- Accessibility: Simplifies crypto exposure for institutions/retail investors constrained by compliance or technical barriers.
- Regulated Framework: Mitigates custody risks vs. direct holdings.
- Drawbacks: Higher fees (0.05%-2.5%), limited trading hours, and potential tracking errors.
Product Structures and Key Players
1. ETF vs. ETP
- Spot ETFs: Hold actual crypto (e.g., Canada’s Purpose Bitcoin ETF).
- Futures ETFs: Track derivatives (e.g., ProShares Bitcoin Strategy ETF).
- Physical ETPs: 100% asset-backed (e.g., 21Shares products).
- Synthetic ETPs: Use derivatives (e.g., XBT Provider’s notes).
2. Top Products by AUM
| Product | Type | Asset | AUM (2024) | Region |
|---|---|---|---|---|
| ProShares Bitcoin Strategy ETF | Futures ETF | Bitcoin | $1.68B | USA |
| Purpose Bitcoin ETF | Spot ETF | Bitcoin | $1.2B | Canada |
| 21Shares Bitcoin ETP | Physical ETP | Bitcoin | $800M | Switzerland |
Trend: Bitcoin dominates (64% of top products), with Ethereum/Solana gaining traction.
Regional Adoption
Europe & Switzerland
- Pioneers: First ETPs launched in Sweden (2015) and Switzerland (2016).
- UCITS Hurdle: EU rules limit crypto ETFs due to diversification requirements.
North America
- Canada: Approved first Bitcoin ETF (2021). Now offers staking ETH ETFs.
- USA: Only futures ETFs approved (ProShares, 2021). Spot ETF approvals expected Jan 2024.
Asia
- Hong Kong: Approved crypto futures ETFs (2022). Spot ETF applications now accepted.
Operational Models
Key Stakeholders:
- Issuers: Coordinate product design (e.g., BlackRock, 21Shares).
- Custodians: Safeguard assets (Coinbase, Fidelity Digital Assets).
- Market Makers: Provide liquidity (Flow Traders, GHCO).
- APs (Authorized Participants): Handle share creation/redemption (Jane Street, Cantor Fitzgerald).
Fee Dynamics:
- Early ETPs charged up to 2.5%. Competition drives fees down (e.g., Fidelity’s 0.39% for spot BTC ETF).
Future Trends
- US Spot ETFs: Approval could catalyze global inflows ($20B predicted for BlackRock’s fund).
- Institutional Staking: Growth in ETH staking products (e.g., 3iQ’s staking ETF).
- Chain-Bonded Products: Innovations like 21.co’s collaboration with Index Coop.
FAQs
Q: How do crypto ETPs differ from holding crypto directly?
A: ETPs offer regulated exposure without private keys but may incur higher fees and limited trading hours.
Q: Which regions lead in crypto ETP adoption?
A: Europe (Switzerland, Germany) and North America (Canada, pending US spot ETFs).
Q: What’s the impact of US spot ETF approvals?
A: Expected to boost institutional participation and legitimize crypto in traditional portfolios.
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