With increasing crypto popularity, more and more investors are jumping on the crypto bandwagon.
There are many investors who do not wish to buy cryptocurrencies and still want to get some exposure to the crypto market. Such investors are turning to digital asset investment products like crypto exchange-traded products (ETPs). The fact that leading investment firms like CoinShares and LTC Group are actively launching crypto ETPs only seems to verify this claim.
Reading this, you might wonder – What are crypto ETPs? Are they becoming popular among investors? Well, tag along. This post will answer all these questions.
In this article, we will discuss what ETPs are and the recent crypto ETP launches by CoinShares and ETC Group.
Let’s get started!
In traditional financial markets, ETPs are securities that track underlying assets. These assets include securities, indexes, or other financial instruments. ETPs work similar to stocks. However, ETPs derive their prices from the underlying assets they track.
What are crypto ETPs, you ask?
In simple words, crypto exchange-traded products (ETP) are financial instruments that track the value of underlying cryptocurrencies without the need for you to buy or sell cryptocurrencies on a cryptocurrency exchange. Instead, they give traditional investors exposure to the crypto asset without actually having to buy the asset.
There are several types of ETPs, such as exchange-traded notes (ETNs) and exchange-traded commodities (ETCs).
ETNs also track an underlying asset, in this case, cryptocurrencies. However, ETNs do not have collateral backing making them an unsecured asset.
As for ETCs, these are securities that can track individual commodities or a basket of different commodities.
Now that you know all the ETP jargon, let’s discuss what’s happening in the crypto ETP space.
For a little background, CoinShares is the largest digital asset investment firm in Europe. They manage assets worth billions on behalf of their clients across the world.
According to Frank Spiteri, Chief Revenue Officer at CoinShares, the demand for digital assets is surging among traditional investors. Keeping this demand in mind, CoinShares is offering crypto ETPs for retail and institutional investors.
In January, CoinShares launched a $200 million physically-backed Bitcoin ETP (BITC) on the SIX Exchange, a regulated stock exchange located in Switzerland. Each CoinShares Bitcoin ETP is physically backed by 0.001 Bitcoin (BTC).
The custodian for this investment product is Komainu. CoinShares established the investment in June 2020 in partnership with the Japanese bank Nomura Holdings and Ledger, a leader in hardware wallets.
Later in February, CoinShares launched Physical Ethereum (ETHE) on SIX exchange. At launch, each ETHE was backed with 0.03 ETH. Talking about assets under management (AUM), CoinShares launched ETHE with nearly $75 million in AUM. Investors will get access to ETHE at a base fee of 1.25%. The custodian for this investment product is Komainu, the same custodian of CoinShares BITC.
You can find ETHE on Bloomberg. At launch, it was listed at an opening price of $47.30.
In April 2021, CoinShares launched their third physically-backed ETP – Litecoin ETP.
The ticker symbol LITE represents CoinShares Physical Litecoin. Each unit of this physically-backed Litecoin ETP was pegged with 0.2 Litecoin (LTC) at launch.
Initially, LITE is listed on the SIX Exchange at a base fee of 1.5% p.a. LITE is also listed on Bloomberg. The opening price was $44.5.
Recently, in June 2021, CoinShares issued three exchange-traded notes (ETNs) on Deutsche Boerse’s Xetra market.
CoinShares ETNs will track Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC). Thanks to these ETNs, investors will gain exposure to their underlying cryptocurrencies without having to set up a cryptocurrency wallet.
Talking about Deutsche Börse, they claim to be the world’s first exchange to launch centrally cleared crypto products. For those who don’t know, central clearing is a tool used to maintain stability in the European derivatives market by ensuring a financial establishment takes on the counterparty credit risk.
Currently, Deutsche Börse has a catalog of 15 ETNs from six providers on Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), and Litecoin (LTC).
On April 12, 2021, ETC Group announced listing a Litecoin Exchange Traded Commodity (ETC) on Deutsche Boerse’s Xetra market. The Litecoin ETC is a central counterparty cleared exchange-traded product. It will track the price of Litecoin.
ETC Group’s Litecoin ETC will trade under the ticker symbol ELTC. This investment product has a management fee of 2%. HANetf, an independent ETP provider, will market and distribute ELTC.
Earlier in March, ETC Group launched their Physical Ethereum ETC on Deutsche Boerse’s Xetra market. This asset tracks the price of Ethereum (ETH).
In June 2021, ETC Group launched the first Bitcoin ETP in the United Kingdom. This Bitcoin ETP will be made available to traders on the Aquis Exchange Multi Trading Facility (MTF). However, the clearing is managed by SIX x-clear, a Switzerland-based central counterparty clearing house. The Bitcoin ETP will trade in four different currencies – GBP, CHF, EUR, and USD.
Other than their Bitcoin ETP, ETC Group also listed two exchange-traded commodities – a) ETCetc, ETC Group’s Physical Bitcoin, and b) ETHetc, ETC Group’s Physical Ethereum. These exchange-traded commodities were launched on the Euronext stock exchanges in Paris and Amsterdam.
Crypto exchange-traded products (ETPs) are investment vessels that track the price of an underlying cryptocurrency. ETPs allow investors to benefit from the cryptocurrency market without having to buy cryptocurrencies. Moreover, many investors see crypto ETPs as a hedge against inflation. Thanks to this, ETPs are becoming popular.
Considering the recent crypto ETP launch by CoinShares and ETC Group, the crypto ETP industry is gaining momentum in Europe.