Bitcoin ETPs are exchange-traded investment vehicles that track the price of bitcoin. It offers investors the ability to invest in bitcoin without having to go through the process of buying and securely storing bitcoin themselves. Read on to learn everything you need to know to get started with Bitcoin ETPs.
What is a Bitcoin ETP?
A Bitcoin ETP is an exchange traded product that has the digital currency bitcoin (BTC) as the underlying asset.
In the same way that you may be buying a Gold ETP or a stock index tracker ETN, you can invest in bitcoin by purchasing Bitcoin ETPs.
The DDA Physical Bitcoin ETP (XBTI), for example, is backed 1:1 by “physical” bitcoin held in cold storage on behalf of XBTI holders. The leading Bitcoin ETP can be traded on Deutsche Börse Xetra, SIX Swiss Exchange, Euronext Paris, and Euronext Amsterdam, and comes with a competitive management fee of only 0.95% p.a.
Exchange-Traded Bitcoin is on the Rise
As bitcoin continues to outperform essentially every other asset in the global markets, more and more investors are flocking towards the digital gold.
While most retail investors are happy to download Bitcoin apps and buy the digital currency outright, there are those who prefer to or have a regulatory requirement to buy exchange-traded bitcoin products on stock exchanges, alleviating the need for securely storing crypto themselves.
The crypto ETP market has experienced increasing demand in the last five years, with 2020 alone recording a fourfold increase, which saw its market value reaching $3.1 billion, according to TrackInsight. And the market shows no sign of slowing down. It has tripled in value from last year to over $9 billion in June 2021, and exchanges like Deutsche Börse Xetra, Swiss Exchange, Euronext Paris, and Euronext Amsterdam are now offering dozens of crypto ETPs to both retail and institutional investors.
This rise of exchange-traded crypto products is majorly driven by the success and popularity of bitcoin, moving from “magic internet money” to a mainstream investment asset.
Bitcoin ETPs have been one of the major beneficiaries of the meteoric rise as more bitcoin ETP issuers are entering the market. Deutsche Digital Assets, for example, launched its physically-backed Bitcoin ETP in 2021. According to a 2020 report by Deutsche Börse, bitcoin is among the most traded products in the ETP segment.
Numerous countries that previously weren’t fond of exchange-traded crypto products are beginning to change their stance with the UK, Brazil, and Canada being the latest addition to a growing list of countries where you can trade crypto ETPs, which includes the likes of Germany, Switzerland, and Sweden.
Now that the first Bitcoin futures ETF has been approved in the United States, the market for exchange-traded bitcoin products is poised to experience even more growth as US investors will finally be able to buy bitcoin investment vehicles on a US securities exchange.
The Case for Bitcoin ETPs
Bitcoin ETPs provide advantages for investors who are looking to diversify their portfolio into an alternative asset that’s uncorrelated with stocks and bonds over the long term.
But why purchase bitcoin ETPs when you can own the underlying asset itself?
There are several reasons for that.
- As many financial regulators across Europe still haven’t made up their minds on how to best regulate digital assets, crypto exchanges regularly find themselves in a situation of regulatory uncertainty, which adds a layer of risk to investors holding funds on these exchanges.Conversely, Bitcoin ETPs are established investment vehicles that trade on traditional security exchanges, mitigating the regulatory risk that exists when trading crypto outright on digital asset exchanges. Investors can invest in Bitcoin ETPs with confidence, knowing that all stakeholders have been examined and trades are closely monitored to ensure all trading activities are at par with regulatory requirements.
- Not all investors are ready to deal with buying and securely storing bitcoin in a personal wallet. Investors who have mismanaged their private keys or seed phrases have lost bitcoin worth millions of dollars in the past, highlighting the issue of secure bitcoin storage. By purchasing bitcoin through an ETP, investors minimize the risk of losing their funds to due wallet mismanagement. Established bitcoin ETPs are using globally operating custodians, such as Coinbase Custody to hold bitcoin in cold storage.
- Retail investors in Europe are used to buying exchange-traded investment vehicles, such as ETFs, ETNs, and ETPs. Since they essentially trade like stocks on some of Europe’s largest securities exchanges, many investors are more comfortable buying crypto ETPs than they are buying crypto outright. It’s also more convenient to buy a Bitcoin ETP using the online broker they already use as opposed to opening a new account on a crypto exchange.
- Institutional investors are (for the most part) still barred from buying bitcoin outright, which makes Bitcoin ETPs the only available option to add bitcoin exposure to their portfolios. A fund manager that wants to diversify their portfolio with bitcoin can buy a Bitcoin ETP through their broker in the same way they buy stocks, bonds, and ETFs.
To provide the market with a best-in-class Bitcoin ETP, DDA launched the Physically Backed Bitcoin ETF earlier this year. Read on to learn more about it.
XBTI: DDA’s Physically-Backed Bitcoin ETP
The DDA Physical Bitcoin ETP (XBTI) is a 100 percent collateralized exchange-traded product that tracks the price of bitcoin (BTC).
Each fully bitcoin-collateralized note of the ETP represents a claim to a predetermined amount of BTC. XBTI’s underlying bitcoin holdings are stored in cold storage with trusted custodians (Fidelity Digital Assets and Coinbase Custody) combined with third-party insurance. All bitcoin held in custody as collateral is not available for lending.
What’s more, the long-only ETP has a total expense ratio of 0.95% p.a, making it one of the cheapest crypto ETPs in the market.
Since its initial launch on April 15, 2021, on Deutsche Börse, the DDA team has also listed the XBTI ETP on SIX Swiss Exchange in USD and CHF and Euronext Paris & Amsterdam.
XBTI is currently registered for sale in 24 European countries: Germany, the Netherlands, Norway, Sweden, Italy, France, Estonia, Poland, Slovakia, Spain, Finland, Greece, Portugal, Slovenia, the Czech Republic, Denmark, Austria, Belgium, Cyprus, Ireland, Switzerland, Liechtenstein, Luxembourg, and Malta
Ready to get XBTI? Get started here.
Deutsche Digital Assets is the trusted one-stop-shop for investors seeking exposure to crypto assets. We offer a menu of crypto investment products and solutions, ranging from passive to actively managed exposure (crypto ETPs), Quantitative Investment strategies as well as financial product white-labeling services for asset managers.
We deliver excellence through familiar, trusted investment vehicles, providing investors the quality assurances they deserve from a world-class asset manager as we champion our mission of driving crypto asset adoption. DDA removes the technical risks of crypto investing by offering investors trusted and familiar means to invest in crypto at industry-leading low costs.
For further information, please visit deutschedigitalassets.com
This article represents solely a non-binding preliminary information which serves exclusively advertising purposes and is not a prospectus in the sense of the European Securities Prospectus Act, the German Investment Act or the German Investment Code or a corresponding foreign law. The prospectus for the physically backed Bitcoin ETP is available at https://deutschedigitalassets.com/products/etp/xbti-dda-funds-physical-bitcoin-etp/ Please refer to the Prospectus before making any final investment decisions.
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