State of Crypto Issue 9
Inside Crypto Exchange-Traded Products
In this magazine, we dive deep into the mechanics of ETPs, exploring how they differ from other investment vehicles and their potential benefits for investors. We also analyze the impact of ETPs on the potential for increased adoption among traditional investors and the implications for the overall cryptoasset ecosystem in light of last year's debacles.
What's inside?
The Evolution of Investment Products & Cryptoassets
Crypto ETPs bring increased accessibility, transparency, liquidity, and legitimacy. Currently, investors who want crypto exposure have to navigate complex and sometimes offshore exchanges, or invest in unregulated funds with a high-risk level. Crypto ETPs simplifies this process by allowing investors to buy and sell shares of the ETP on a regulated exchange, just like they would with any other stock or ETF.
What's an Exchange-Traded Product (ETP)?
An ETP is more akin to an Exchange-Traded Commodity (ETC), which is a debt instrument fully collateralized with physical assets, such as gold or Bitcoin. It's crucial to understand that not all investment products are created equally. Products based on futures and closed-end funds are associated with risks not present in spot and physically-backed ETPs.
An Inside Look at ETP Construction
The ETP ecosystem can be divided into the primary and secondary market. In the primary market, only Authorized Participants (APs) can transact with the ETP issuer and shares are created and redeemed at their fair value called the NAV. In contrast, in the secondary market, investors can buy and sell existing shares at market price through a stock exchange or over-the-counter (OTC) and liquidity is supported by regulated market makers (MMs).
The Different Ways to Invest in Cryptoassets
Investors have many ways to get exposure to cryptoassets, depending on their risk profile, tech savviness, and regulatory constraints. Broadly, there are two primary considerations after conducting due diligence on the underlying assets and the counterparties: 1) how to purchase cryptoassets and 2) how to store them. We conclude that the ETP structure provides the easiest and most secure way for institutional investors to invest in cryptoassets.
Crypto made easy.
21Shares takes innovation to the next level with the largest suite of cryptocurrency exchange-traded products (ETPs) in the world. In 2018 it pioneered the world’s first cryptocurrency index listing on the SIX Swiss Exchange, and it continues powering its cryptocurrency franchise with cutting-edge research and groundbreaking approaches to product strategy. 21Shares aims to provide all investors with an easy, secure, and regulated way to buy, sell, and short cryptocurrency through existing bank and brokerage accounts.
