The cryptocurrencies asset class is getting new investment opportunities: Invesco is launching one, WisdomTree three ETPs.
In the past few days, two large US companies have entered the European cryptocurrency business. Deutsche Börse Xetra now has 26 Exchange Taded Nodes (more on this at the bottom of the article) from seven providers on various crypto currencies.
Invesco and Wisdom Tree now focused on providing Exchange Traded Products (ETP). Both companies cite the reasons for their product development that the crypto market has grown rapidly since 2009 and is currently quoted at a market capitalization of around 2.6 trillion US dollars – so far, so true. That’s why Invesco and WisdomTree want to offer their investors an “easy” way to invest in this asset class without having to deal with technology and custody – for different fees, of course.
Another thing the two providers have in common is that they both provide “physically secured” ETPs. This means that the currencies are (almost) 1: 1 hedged. So that, for example, every Bitcoin that is bought under this ETP must also be bought and stored by the institution.
Invesco: Bitcoin ETP
the Investment company has now launched the so-called BTIC in cooperation with CoinShares. This Bitcoin ETP forms the Hourly Bitcoin Reference Price Index from CoinShares. The bitcoins used are also deposited with the Zodia Custody custodian. This is a company that has been registered with the UK Financial Conduct Authority (FCA) since 2020. The annual subscription fee (TER) for BTIC is 0.99 percent and is cheaper in relation to the WisdomTree offers.
WisdomTrees cryptocurrency baskets
The product sponsor and asset manager WisdomTree came up with a number of cryptocurrency baskets. These are the products MEGA, BLOC and WALT ETP. Jason Guthrie, Head of Digital Assets Europe at WisdomTree, comments on this development:
It is at [native Kryptowährungen, Zahlungssystemen, Smart Contracts, DeFi und NFTs] about truly disruptive technologies. We expect the asset class to become more important in investor portfolios.
Jason Guthrie, Head of Digital Assets, Europe, WisdomTree
The company is now preparing for this step. As the embedded graphic shows, the products are listed on the German stock exchange Xetra and the Swiss stock exchange SIX and are therefore approved for sale in the European Union. (TER is the abbreviation for Total Expense Ratio, the annual sales charge on the products).
The first ETP product in the MEGA graphic only contains the crypto currencies Bitcoin and Ethereum and is rebalanced quarterly. In contrast, there is the ETP WALT, which contains the Altcoins Bitcoin Cash, Cardano, Litecoin, Polkadot and Solana. In this, the maximum weighting of a currency is limited to 50 percent, while the minimum weighting is 2.5 percent. In addition, this basket would be rebalanced annually.
The third ETP product, on the other hand, combines the currencies from MEGA and WALT. Bitcoin and Ethereum as well as Bitcoin Cash, Cardano, Litecoin, Polkadot and Solana can be found in the cryptocurrency basket. Like WALT, BLOC also experiences an annual rebalancing.
ETP, ETF, ET what?
For all non-daily financial market specialists: ETPs are products that, like securities, can be traded on a stock exchange. ETP is only an umbrella term for the “Exchange traded … ”, But also a bond. This means that in the event that the companies go bankrupt, the currencies contained are part of the liability pool. The products ETC and ETN fall under ETP. The first is Exchange Traded Commodities (Raw materials and precious metals), the second around Exchange Traded Notes (Currencies).
The better-known also belong to this group Exchange Traded Funds (ETF). In contrast to the American market, it has not yet been possible to issue ETFs on crypto in Europe. This is due to the fact that in Europe there are highly regulated products that fall under the area of special funds. This protects them in the event of the company’s bankruptcy.