on the crypto
Over the past year, the demand for regulated crypto investment products has soared. The growing variety of exchange-traded products (ETPs) listed on traditional exchanges and the rapid development of indices have enabled more investors to gain exposure to crypto assets without the complexities of ownership and custody.
The role of exchanges
A wave of crypto ETPs was led by Germany's Deutsche Börse and Swiss exchange SIX. The SIX exchange, where it is also possible to buy Bitcoin with PayPal, now lists 22 crypto ETPs from seven issuers and recently reported record numbers of transactions and turnover in the trading log.
At the beginning of January, a Bitcoin ETP on Deutsche Börse recorded average daily volumes of € 57 million, up from € 15,5 million the previous month, and almost equal to those of the ETF with the largest volume. high on the exchange.
The willingness of these exchanges to partner with cryptocurrency industry participants and invest in the infrastructure needed to list these products has encouraged a group of innovative ETP issuers looking to capitalize on the growing demand for regulated offerings.
Crypto trusts
A crypto trust is a type of fund typically managed by a professional management team. Accredited investors are able to invest in these trusts by purchasing over-the-counter shares, and there are fewer regulatory requirements than publicly traded ETPs.
The best example is the Grayscale Trust, which offers several crypto-asset-linked funds whose shares can be purchased over-the-counter. Greyscale has become an indomitable force in the cryptocurrency markets, with billions of AUM and annual returns of + 200%.
The firm drives institutional investments in the United States through its regulated crypto offering and is the best proof of demand for these types of products, which are not yet available on traditional exchanges.
However, OTC traded trusts have several disadvantages over traditional exchange traded products: ETP markets are more liquid, which makes pricing more efficient, investors can easily enter or exit the markets without having to freeze funds for a while. certain period of time and the structure and rules of an ETP are fixed, which provides an additional layer of security for an investor.
Indices drive ETPs
Crypto indices developed by exchanges and data providers in recent years have driven the growth and diversification of crypto investment products. Indices provide information on the price movement of an asset or basket of assets and can be used to create ETPs, funds and derivatives.
CME's cryptocurrency indices have enabled the launch of a variety of futures and options contracts on Bitcoin and Ethereum. The huge success of CME's crypto derivatives offering is the best example of how traditional exchanges are driving adoption.
We are still in the very early stages of cryptocurrency financial products and there are many regulatory hurdles to overcome. However, what we do know is that adoption is accelerating and regulators and exchanges, at least in some countries, are open to innovation.
