Investors Europe presents Crypto ETFs and ETNs
Investors Europe team is happy to present a new investing opportunity - Crypto ETFs and ETNs, the easiest way to trade Crypto.
Cryptocurrencies are continuously attracting new investors. A growing number of investment experts believe that digital assets are essential to an investment portfolio considered to be well-diversified.
However, the ecosystem of purchasing and storing cryptocurrencies has not matured enough. Most investors consider it both risky and very technical. That’s why we in Investors Europe are proud to introduce to you our new product - Crypto ETFs and ETNs.
Traditionally, ETFs and ETNs are used to track an underlying asset. This could be a metal, like Gold, or a commodity like Oil. In the case of crypto ETNs and ETFs, the underlying asset is a cryptocurrency, most popularly Bitcoin. You’re therefore able to invest in cryptocurrencies without actually owning the digital assets.
When you purchase a crypto ETF, the investment firm managing the fund makes purchases and stores the underlying cryptocurrency. Ownership is then distributed in shares to the investors. In the case of a crypto ETN, instead of equity in the fund, each traded note of an ETN represents an obligation from a legal entity holding the underlying asset as collateral. They are effectively debt securities.
At Investors Europe, we recognize the vast and expansive investment opportunities that digital assets provide. In addition to crypto CFD trading, we offer both ETFs and ETNs through our Rocktrader platform here.
How do they function and what is their difference?
In practice, ETFs and ETNs are very similar. Both are designed to track an underlying asset, both often have lower expense ratios than actively managed mutual funds, and both trade on the major exchanges just like stocks.
The main difference is under the hood. When you invest in an ETF, you are investing in a fund that holds the asset it tracks. That asset can be stocks, bonds, gold (or other commodities), futures, or a combination of assets. In the case of a Crypto ETF, the asset being tracked is a cryptocurrency.
On the other hand, ETN is more like a bond. It’s an unsecured debt note issued by an institution. Just like with a bond, an ETN can be held to maturity or bought or sold at will, and if the underwriter (usually a bank) were to go bankrupt, the investor would risk a total default.
For that reason, before investing in an ETN, research into the credit rating of the underwriter is an important metric. If the underwriter were to receive a credit downgrade, shares of the ETN would likely experience a downturn unrelated to the underlying product it’s tracking.
ETNs have a notable advantage over ETFs given lower tracking errors. ETFs achieve varying levels of success when tracking their respective indexes. Investors will notice some amount of divergence from the index they track due to various factors, such as illiquid components.
Tracking error is virtually eliminated with ETNs, as the issuer agrees to pay the full value of the index (less the expense ratio). An ETN simply pays investors once the fund matures based on the price of the asset or index. There’s no tracking error because the fund itself isn’t actively tracking.
Advantages of Crypto ETFs and ETNs trading with Investors Europe
Investors avoid the cost of ownership of cryptocurrencies
Perhaps the biggest benefit of cryptocurrency ETFs is that they provide exposure to the crypto without the additional expenses of ownership. Physical ownership of cryptocurrencies entails many additional expenses. For example, there are custody charges associated with cryptocurrencies. Secure digital wallets to store purchased cryptocurrencies also charge an annual fee. These charges add up to a tidy annual sum. Cryptocurrency ownership also comes with other hidden charges, such as transaction and network fees. Cryptocurrency ETFs outsource these expenses and hassles to ETF providers.
They offer an affordable alternative to investors
Shares in cryptocurrency ETFs offer exposure to a fast-rising asset class at a fraction of the actual cost to purchase crypto. In the past couple of years, the price of cryptocurrencies—especially bitcoin—has skyrocketed. They have largely become inaccessible to the average investor. A cryptocurrency ETF is an affordable alternative for investors wishing to put money into the asset class.
Investors don’t go through the hassle of learning the difficult technical underpinnings of crypto
Cryptocurrency jargon, steeped in its technological underpinnings, has remained a persistent roadblock to crypto adoption. It is difficult for average investors to grasp the scope and functioning of cryptocurrencies. Investors who are not familiar with technology may find crypto-speak, such as halving and blockchain, a fairly fraught learning curve. Investing in a cryptocurrency ETF outsources the learning curve to analysts.
Secure compared to actually owning digital assets
Cryptocurrencies have been hacked repeatedly since they were launched, leading to a big question over the security of the nascent asset class. Ensuring security for cryptocurrencies can be a tall order for individual investors, who may not be familiar with their workings. A cryptocurrency ETF outsources security functions to the providers of these ETFs.
Investors Europe has extensive history and experience in offering ETFs and ETNs to our investors. Through our Rocktrader platform, our investors are offered the opportunity to safely invest in the fastest-growing asset class in recent history, through Crypto ETNs and ETFs. Use our 20 years of experience in financial markets to explore the most modern and promising investment product.