Crypto ETF Basics

An ETF is an investment you can buy and sell on an exchange, like a share. "ETF" is often used broadly, although some crypto products are technically ETPs, ETNs or ETCs.

A crypto ETF aims to follow the value of a cryptocurrency, a group of assets or a crypto-related strategy. How it does this depends on the type of product.

It gives you crypto exposure through a regular investment account. You do not need to buy, store or manage the crypto yourself.

Crypto prices can move sharply, so you could lose a significant part of your investment. Fees, tracking differences and the product's structure can also affect returns.

Holds crypto, so its value moves with the crypto's price. It provides the closest ETF-based exposure to owning crypto directly.

Uses the crypto held to help operate and secure its blockchain network. In return, it earns staking rewards that may be passed on to investors as extra yield after fees.

Sells call options to earn premiums from its crypto exposure. This can provide income and soften some losses, but it also limits potential gains.

Uses derivatives to multiply the crypto's daily price movement. Gains can be larger, but losses are also magnified.

Uses derivatives to move against the crypto's daily price. It can gain when the price falls, but lose when the price rises.

Uses futures contracts to track crypto without holding it directly. Returns can differ from the spot price because contracts must be replaced as they expire.

Invests in companies connected to crypto, such as exchanges, miners or technology providers. Returns depend on both crypto markets and how those businesses perform.

Uses financial contracts to copy crypto returns without owning the crypto. This adds reliance on the institutions behind those contracts.

Records ownership of a fund using blockchain-based tokens. The fund may invest normally, but its shares are issued or represented on a blockchain.

Moves between different assets using a set of rules or market signals. Its exposure changes as the strategy looks for stronger opportunities or lower risk.

Check which cryptocurrency, companies or strategy the ETF follows. Products with similar names can provide very different exposure.

The total expense ratio, or TER, is the yearly fee charged by the product. Trading costs and the gap between the buying and selling price can also affect your return.

The issuer creates and manages the product. Consider its experience, reputation and how the assets are held.

The domicile is the country where the product is legally registered. It can affect regulation, tax and whether the product is available to you.

More liquid products are generally easier and cheaper to trade. Look at the trading volume and the gap between the buying and selling price.