Research Summary
The report provides an in-depth analysis of the global crypto Exchange-Traded Products (ETPs) landscape, highlighting the growth, types, structure, and regulatory environment. It also discusses the role of various market participants, including issuers, custodians, and index providers, and the potential impact of the anticipated approval of US spot ETFs on the crypto ETP market.
Key Takeaways
Growth and Dominance of Crypto ETPs
- Significant Growth: Crypto ETPs have seen a substantial increase in assets, with a 120% growth from $5.79 billion at the end of 2022 to $12.73 billion by the end of November 2023.
- ETFs Dominate: ETFs account for $10,747 billion, or 98% of the total $10,990 billion in ETP assets, highlighting their dominance in the ETP landscape.
Structures and Types of Crypto ETPs
- Physical vs Synthetic: The majority of crypto ETPs on the market are physical due to investor preference for transparency and reduced counterparty risk.
- Product Variety: Crypto ETP offerings have expanded from single asset trackers to include basket, staking, inverse, leveraged products, and volatility-managed indices.
Regulatory Environment and Challenges
- Regulatory Approvals: Regulatory approvals impose jurisdictional and investor-type access restrictions on crypto ETPs, such as the US Securities Act of 1933 and the UK FCA’s retail investor ban.
- Trading Hours Challenge: Traditional exchanges’ limited trading hours contrast with crypto’s 24/7 markets, presenting a challenge for crypto ETPs.
Market Participants and Roles
- Issuers: Issuers, often specialized SPVs, are responsible for ETP design and coordination, with increasing participation from traditional finance firms like WisdomTree, VanEck, and potentially BlackRock and Franklin Templeton, pending SEC approval.
- Custodians: Custodians such as Coinbase, Fidelity Digital Assets, and Gemini secure the physical cryptocurrencies for ETPs, ensuring asset safety.
Anticipated Approval of US Spot ETFs
- US Spot ETFs: The anticipated approval of US spot ETFs in 2024 is expected to catalyze the growth and global availability of Crypto ETPs, meeting the demand of a growing number of investors seeking crypto exposure through regulated avenues.
Actionable Insights
- Monitor Regulatory Developments: Stakeholders should closely monitor regulatory developments, particularly in the US and EU, as they could significantly impact the crypto ETP landscape.
- Assess Market Participants: Understanding the roles and strategies of various market participants, including issuers, custodians, and index providers, can provide valuable insights into the crypto ETP ecosystem.
- Explore Product Innovation: The rise in product innovation in the crypto ETP space presents opportunities for issuers and index providers to differentiate themselves and capture market share.
