Ever wondered how you can profit from a cryptocurrency without ever touching a digital wallet? This article explains the mechanics of exchange‑traded products (ETPs) that track crypto assets, how they differ from buying the coin directly, and what you should consider before adding them to your portfolio.
What is an exchange‑traded product?
An exchange‑traded product is a type of security that trades on a traditional stock exchange, just like a share of a company. The most common forms are exchange‑traded funds (ETFs) and exchange‑traded notes (ETNs). A crypto‑focused ETP is structured to give investors exposure to the price movements of a specific cryptocurrency or a basket of them, while the product itself is listed on a regulated exchange.
There are two main ways an ETP can be “backed.” A physically backed product holds the actual cryptocurrency in custody; each share of the ETP represents a proportional claim on that reserve. A synthetically backed product uses derivatives, such as futures contracts, to mimic the price performance without holding the underlying coin.
Because the ETP is traded on an exchange, you can buy or sell it through a standard brokerage account, using the same tools you would for stocks. This eliminates the need for a separate crypto exchange, private keys, or a personal wallet. The trade‑off is that the ETP issuer typically charges a management fee, which is deducted from the fund’s assets each year.
A real‑world illustration
In September 2026, European asset manager 21shares listed the region’s first physically backed Zcash exchange‑traded product (ETP) on Euronext Paris and Amsterdam. The product allows investors to gain exposure to ZEC – a privacy‑focused cryptocurrency – through ordinary brokerage accounts, without having to store ZEC themselves. At the same time, 21shares introduced a physically backed ETP for ETHFI, the governance token of the Ether.fi DeFi protocol. Both products carry an annual management fee of 2.5%.
This launch followed the earlier introduction of a Zcash ETF in the United States, showing that institutional interest in privacy coins is expanding into regulated markets.
What this means for you
For a casual investor, a crypto ETP offers a convenient bridge between traditional finance and the crypto market. You can:
- Buy and sell the product during market hours, just like a stock.
- Keep the investment in a familiar brokerage account, avoiding the learning curve of crypto wallets and private keys.
- Gain exposure to a coin that might otherwise be difficult to hold, such as a privacy‑oriented token that some exchanges limit.
However, the convenience comes at a cost. The 2.5% annual fee in the 21shares products is higher than many Bitcoin or Ether funds, which can erode returns over time, especially in a flat or declining market.
What to check before you invest
- Backing type: Verify whether the ETP is physically or synthetically backed. Physical backing provides direct ownership of the underlying crypto, while synthetic exposure may carry counterparty risk.
- Management fee: Compare the annual expense ratio with similar products. Even a 0.5% difference can add up over several years.
- Liquidity: Look at the average daily trading volume on the exchange. Low liquidity can lead to wider bid‑ask spreads, increasing transaction costs.
- Custody arrangements: For physically backed ETPs, find out who holds the crypto and what security measures are in place (e.g., multi‑signature wallets, insurance).
- Regulatory environment: Ensure the product is approved by the relevant financial authority in your jurisdiction, which adds a layer of investor protection.
FAQ
Do I still need a crypto wallet to own an ETP?
No. The ETP is a traditional security that lives in your brokerage account. The issuer handles custody of the underlying cryptocurrency if the product is physically backed.
Can I earn staking rewards through a crypto ETP?
Only if the ETP’s structure includes those rewards. Most ETPs simply track price movements and do not pass on staking yields to shareholders.
What happens if the underlying cryptocurrency is delisted from major exchanges?
The ETP issuer may need to adjust the fund’s holdings, potentially liquidating the crypto or swapping it for a similar asset. This could affect the product’s price and liquidity.
Are crypto ETPs suitable for long‑term investors?
They can be, but you should weigh the higher fees and any additional risks against the convenience of not managing private keys. For long‑term holdings, a physically backed product with a low expense ratio is generally preferable.
This article references reporting from cointelegraph.com.
