What are cryptocurrency ETPs and ETFs? What is the difference?

Bitcoin ETF

The ETFs ( Exchange Traded Funds ) are funds traded on platforms. A kind of basket that follows market trends.

Imagine an ETF as a basket full of stocks chosen according to some index, like the S&P 500. This index shows how 500 important companies are performing. The basket contains pieces of all those companies.

Something curious: you do not directly own those 500 shares. You only have a paper that says the ETF is yours. The most popular ETF is SPY, a giant that tracks the S&P 500.

A Bitcoin ETF works the same way, but with Bitcoin. You buy the fund, not the cryptocurrency directly. It seems complicated, but in the end, it doesn't matter. If Bitcoin rises, your ETF rises. If it falls, then it falls too.

They are simply another way to get into Bitcoin. No more worrying about thefts or where to store anything. Fewer headaches.

ETP

ETP stands for Exchange Traded Products. Tradable products on platforms.

They are investment products that trade like stocks, with prices derived from other securities. They are traded and settled daily. Technically, they are structured debt securities. They are linked to other securities or commodities.

ETPs are usually passive investments. They mimic the performance of a specific market. And surprisingly, they often outperform active investment products.

The Swiss platform SIX defines them as secured debt securities, without interest. They can replicate an underlying asset. They are not funds legally, although they resemble ETFs.

An interesting example is the Amun ETP from the Swiss stock exchange. It is based on an index that tracks several major cryptocurrencies. When it was launched, it included Bitcoin, XRP, and Ethereum, among others.

A spokesperson for the Swiss regulator Finma mentioned something important: "It is necessary to distinguish between ETP and ETF. ETPs are not under the Collective Investment Schemes Act."

ETPs are similar to ETFs. Both allow for investments without the need for custodians. Fewer regulatory hurdles.

But there are differences. For the SEC to approve an ETF, companies must demonstrate that the futures market is stable. This is not the case with ETPs. Products like the Grayscale Bitcoin Investment Trust already exist.

Conclusion

ETFs and ETPs facilitate entry into the crypto world. Less risk, more convenience. But they are not the same: ETFs are funds and ETPs are bonds. The oversight of the former is stricter.

How do you think the expansion of Bitcoin ETF will affect the market? Share your opinion below.