Should you choose ETP or ETF to invest in cryptocurrencies? The fundamental differences you need to understand

Why are there two different products for investing in Bitcoin?

When entering the cryptocurrency space, investors often face a choice between ETF and ETP. These two products may seem similar but have fundamental differences in legal structure, operation, and regulatory requirements. Understanding what an ETP is and how it differs from an ETF will help you make smarter investment decisions.

What is an ETF - Exchange-Traded Fund?

Exchange Traded Funds (ETF) are funds listed and traded on stock platforms similar to regular stocks. The basic characteristic of an ETF is that it tracks a specific market index to replicate the performance of a basket of assets.

For example, SPY ETF - one of the most famous products worldwide - tracks the S&P 500 index of the US stock market. When you buy SPY ETF, you do not directly hold 500 individual stocks; instead, you own a certificate of ownership in a fund containing those stocks.

Applied to the cryptocurrency field, Bitcoin ETF operates on a similar principle. When you buy a Bitcoin ETF, you are indirectly investing in Bitcoin without managing private keys yourself or worrying about security storage issues. The profit you receive is entirely correlated with Bitcoin’s price fluctuations, as the ETF precisely tracks Bitcoin’s market price.

The main advantage of ETFs is that you avoid cumbersome procedures related to managing cryptocurrency wallets, worrying about hacks or losing private keys.

What is an ETP - Exchange Traded Product?

Exchange Traded Products (ETP) is a broader concept, referring to open investment products listed on an exchange that can be traded within the day. Unlike ETFs, ETPs are classified as debt securities with more complex structures.

According to the definition from the Swiss Stock Exchange SIX, an ETP is a non-interest-bearing debt security, collateralized with the ability to track or amplify the underlying assets - usually commodities or cryptocurrencies. Although traded like ETFs on many markets during the day, legally, ETPs are not considered funds.

Real-world case: Amun ETP - the first cryptocurrency ETP

In 2018, the Swiss Stock Exchange issued Amun ETP - the first multi-cryptocurrency trading product. This ETP is based on the Amun Crypto Basket Index, tracking the performance of five top cryptocurrencies by market capitalization and liquidity:

• Bitcoin (BTC): 49.7%
• Ripple (XRP): 25.4%
• Ethereum (ETH): 16.7%
• Litecoin (LTC): 3%
• Bitcoin Cash (BCH): 5.2%

This mechanism allows institutional and advanced individual investors to access digital assets without going through custodians or other legal barriers.

Legal differences between ETF and ETP

One of the most important differences lies in the legal aspect. The Swiss financial regulator Finma clarified that ETPs do not comply with the Collective Investment Schemes Act (CISA) - which has implications for investors.

In the US, the Securities and Exchange Commission (SEC) has very strict requirements for Bitcoin ETFs. Companies must demonstrate that the cryptocurrency futures market is sufficiently stable before SEC approval, which is why SEC has repeatedly rejected Bitcoin ETF applications.

In contrast, there are no such strict requirements for ETPs. Products like Grayscale’s Bitcoin Investment Trust have operated without SEC approval because they are considered differently structured products.

Which option suits you?

Both ETFs and ETPs aim to help institutional and qualified investors participate in the cryptocurrency market safely. The core difference is: ETFs are tightly regulated funds, while ETPs are more flexible debt securities.

If you value legal certainty and official oversight, ETFs are a better choice. If you seek flexibility and quicker access, ETPs may be more suitable. However, the returns you get from both products will depend entirely on the price volatility of the underlying assets they track.