Bitcoin Exchange-traded fund (ETF)

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While investors wait for a spot bitcoin ETF (exchange-traded fund) in the United States, many investors may not realize that there are already dozens of crypto exchange-traded products (ETPs) available across the world. For those of you unfamiliar with the term, an ETP can be thought of as a packaging layer around an asset or group of assets such as bitcoin and cryptocurrencies, which trades on an exchange like a security. Common exchanges where crypto ETPs can be found include OTCQX by OTC Markets, Nasdaq Nordic, CME GroupCME (for crypto futures and options), Deutsche Brses Xetra, Swiss SIX Exchange and Canadas Toronto Stock Exchange.

Unsurprisingly, there continues to be a lot of confusion about ETPs, especially when it comes to crypto. This knowledge gap can be limiting to people looking for ways to gain crypto exposure without directly holding the asset.

The acronyms above tend to be used interchangeably, but each has its own distinct meaning and there are important differences when it comes to tax treatment, credit risk, ease of trading and rules governing deposits/redemptions that you should know.

To start, ETP is the catch-all term. Every acronym such as ETF or CEF (closed-end fund) falls under the ETP family. Similarities between these products include that they:

Even so, there are a number of substantial differences. For instance, as a result of their unique structures, ETF prices trade at or close to their net asset value (NAV) while CEF share prices can trade at a substantial premium or discount relative to the funds NAV. This is something that we have seen quite often with Grayscale products (see chart).

GBTC Discount Chart

YCharts

Additionally, some ETPs may be restricted to certain investor classes, such as those with a large amount of assets. For instance, only accredited investors can purchase shares in Grayscale products directly from the issuer. On the other hand, ETFs and Grayscale funds trading on the secondary market are open to retail traders.

Among all Grayscale products, the firms bitcoin trust is by far the industrys largest fund available to investors by AUM (assets under management) US$14.05 billion as of this writing. It also offers other similarly-structured products tracking other assets such as ethereum, litecoin, ethereum classic and even a diversified index.

But the crypto ETP market is far more than Grayscale. For instance, Switzerlands SIX Swiss Exchange has a robust roster of crypto ETPs exceeding 40 tickers, with the largest by trading volume being WisdomTree BitcoinBTC (BTCW.SW) and 21Shares Ethereum ETH ETP (AETH.SW). Canadas Toronto Stock Exchange launched North Americas first crypto ETFs in the first quarter of 2021: Purpose Bitcoin ETF (BTCC)which got off to a very strong start raising nearly US$1 billion in its first monthEvolve Bitcoin ETF (EBIT) and CI Galaxy Bitcoin ETF (BTCX).

Additionally, October 2021 saw the launch of the U.S.s first bitcoin ETFs. However, they do not reflect the spot price of bitcoin, but futures contracts that trade on platforms such as the Chicago Mercantile Exchange. The first to launch in October was the ProShares Bitcoin ETF (BITO). However, other offerings include the Valkyrie Bitcoin Strategy ETF (BTF) and the VanEck Bitcoin Strategy ETF (XBTF).

Table of Crypto Exchange Products

Forbes

In most cases, the solution is as simple as having an account at a brokerage firm with access to foreign exchanges where crypto ETPs trade or the OTC Markets exchange. Additionally, qualified investors have a few more investing options because certain ETNs can only be offered to this more sophisticated audience.

Forbes is a bona fide news publication, not an investment advisor, registered broker-dealer, or exchange, and nothing in this publication should be construed as investment advice, research, or investment advisory services. Forbes site is not tailored to a specific readers or prospective readers current or future investment portfolio, investment objectives, or other needs. The content provided in this publication is for informational purposes only. No part of this publication should be construed as a solicitation, offer, opinion, endorsement, or recommendation by Forbes to buy or sell any security, investment, cryptocurrency, or digital good or property in the metaverse. You should consult your legal and tax advisors before making any financial decisions.

I am director of research for digital assets at Forbes. I was recently at Kraken, a cryptocurrency exchange based in the United States. Before joining Kraken I served as Chief Operating Officer at the Wall Street Blockchain Alliance, a non-profit trade association dedicated to the comprehensive adoption of cryptocurrencies and blockchain technologies across global markets. Before joining the WSBA, I was the Lead Associate within the Emerging Technologies practice at Spitzberg Partners, a boutique corporate advisory firm that advises leading firms across industries on blockchain technology. Previously I was Vice President/Lead Strategy Analyst at Citi FinTech, where I drove strategic and new business development initiatives for Citigroups Global Retail and Consumer Bank business across 20 countries. I also served five years as a Senior Intelligence Analyst at Booz Allen Hamilton supporting the U.S. Department of Defense. I have a B.S. in Business Administration from the Tepper School of Business at Carnegie Mellon University and a M.A. in International Affairs from Columbia University's School of International and Public Affairs. Additionally, I am a Certified Information Privacy Professional (United States, Canada, and the European Union) and a Certified Information Privacy Technologist at the International Association of Privacy Professionals (IAPP).

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The Genesis Of Cryptocurrency Exchange-Traded Products - Forbes