Crypto investors could look forward to rising prices in 2024 – we show 5 ETPs that will particularly benefit from this. Getty Images
ETPs are also benefiting from the current crypto rally. Some products achieve a performance increase of around 700 percent over a year. However, the products are also very risky. Which is reflected in a volatility of 100 percent in some places. Business Insider has picked out five ETPs that are currently performing particularly well and explains the difference to ETFs.
The crypto rally is in full swing. The prices of some cryptocurrencies have been skyrocketing since the beginning of the year. One reason: The American Securities and Exchange Commission (SEC) has approved the first twelve Bitcoin ETFs. The ETFs are so-called spot ETFs that invest directly in the cryptocurrency. Since then, Bitcoin has reached new heights and is currently at 61,805.37 euros.
“In the long term, the outlook remains positive – if inflation falls and interest rates are slowly reduced, this will provide additional support for prices in the crypto market,” said Eric Demuth, co-founder and CEO of Bitpanda. Many of the other cryptocurrencies, the so-called altcoins, i.e. cryptocurrencies that were invented after Bitcoin, also benefited from the price jumps of the best-known cryptocurrency.
This is how investors can invest in cryptocurrencies
If you are thinking about entering the crypto market, you can of course purchase the cryptocurrency you want directly. Bitcoin ETFs like those in the USA, on the other hand, do not exist in Europe. Investors can use other products to indirectly invest in digital currencies.
“In Germany we already have Bitcoin ETNs and ETPs,” explains Bitpanda founder Demuth. The products are ultimately identical to the approved ETF for investors, just not the name. The reason: European law. “According to European law, an ETF must reflect more than one asset, so it must be more diversified,” says Demuth. In the USA, on the other hand, an ETF can only consist of one investment – but it is basically the same. If this regulation did not exist, a Bitcoin ETF could also be offered in Germany. “Our experience shows that investors prefer to invest directly in cryptocurrency,” says Demuth.
For this reason, many providers have taken ETPs and ETNs off the market. Still, there are a few products that have benefited from the crypto rally recently. One product achieved a performance increase of over 700 percent over a year. However, it should be noted that some products have a volatility of 100 percent and are in the red for a longer period of time.
This is what differentiates ETF, ETP, ETN and ETC
If you want to enter the crypto market but don’t want to purchase the digital currency directly, there are a few things you should consider. Even though ETF, ETP, ETN and ETC sound quite similar, there are differences in the products, especially in terms of hedging the assets. What they all have in common, however, is that they are listed, which means they are traded on the stock exchange.
What are ETPs?
With ETPs (Exchange Traded Products) investors can bet on the price development of stocks, bonds, raw materials or currencies. The term covers both ETCs and ETNs.
What are ETFs?
An ETF (Exchange Traded Fund) is an index fund that tracks the performance of an index, such as the DAX – that is, the 40 strongest companies in Germany. In addition, ETFs are Ucits-compliant and therefore regulated according to EU guidelines. Like active funds, they are managed as special funds, which means that investors’ assets are protected in the event of the provider’s insolvency.
What are ETCs and ETNs?
ETCs (Exchange Traded Commodities) rely on raw materials such as gold or silver. Legally speaking, these are bonds of the issuer (issuer of the securities). ETNs (Exchange Traded Notes) are also bonds that are linked to the performance of a specified market index. However, an ETN can also only refer to a single value and thus, for example, reflect the price development of the cryptocurrency Bitcoin one-to-one.
The difference between ETFs and ETPs
A big difference between ETFs and ETPs is their legal structure. As special funds, ETFs are protected against the issuer’s insolvency. This is not the case with ETPs. If the provider goes bankrupt, the money is not a special asset. However, with fully physically deposited ETPs, an independent trustee watches over the money and has access to the funds in an emergency.
Some providers, on the other hand, map the development of the underlying value synthetically; the “default protection” of the deposited assets is missing. Some also use leverage or lend the digital assets to increase their own margin – with the corresponding risk. Investors should therefore look very closely at the products.
Investors only need a normal securities account for ETPs. As with ETFs, investors can usually save for ETPs on a monthly basis using a savings plan. In addition, ETPs can not only reflect the performance of one cryptocurrency, but also that of several.
Business Insider has picked out five ETPs that are currently performing particularly well. At this point the note again: Cryptocurrencies are known for their volatility. So they are usually very risky.
This is also the case with ETPs. In addition, most of the products are still very young, which is also a factor higher risk because there is no long-term history. In order to present different products, not all ETPs that reflect the same currency are listed. So this is not a comprehensive ranking. The data used comes from Finanzen.net and justetf. The data is as of March 21 and 25, 2024.
Platz 5: VanEck Smart Contract Leaders ETN (ISIN: DE000A3GXNT4)
Finanzen.net
The VanEck Smart Contract Leaders ETN tracks the “MarketVector Smart Contract Leaders VWAP Close Index”. The ETN is intended to provide access to the performance of the largest and most liquid smart contract assets. The largest positions in the index are currently: Solana with 36 percent, Ethereum with 25 percent, Cardano with 10 percent and Avalanche with 9 percent.
Over a year, the ETN has a performance of around 165 percent. So anyone who invested in the product exactly a year ago can benefit from a decent profit. Who, however since launch in April 2022 is there, he also took a downward slide – and is coming only an increase of 9.71 percent.