What is ETP in Crypto?

So you’ve seen the term “ETP” pop up in crypto news, Reddit threads, or even your brokerage app…

But no one really explains what it is (or how it compares to buying tokens directly).

Is it like an ETF? Is it safer? Can you actually profit from it in a smarter way?

This article breaks it all down.

We’ll explain exactly what a crypto Exchange-Traded Product (ETP) is, how it works, where it fits in the traditional vs. DeFi spectrum, and when it might make more sense than trading coins on your own.

What does ETP mean in crypto?

A crypto ETP (Exchange-Traded Product) is a regulated financial instrument classified as a bearer debt security. This means it’s a type of investment product that can be bought and sold on an exchange, just like a stock.

Legally, however, it’s treated as a loan that the issuer promises to repay based on the performance of the underlying crypto asset, and whoever “bears” or holds the security is considered its rightful owner (i.e., no personal registration required).

Accordingly, ETPs allows you to invest in cryptocurrencies (BTC, SOL, XRP, etc.) without directly holding or managing the actual tokens (tokens here just mean the digital assets or units on blockchains that represent value, think of them as the “coins” you would otherwise store in a wallet yourself).

For example, when you buy a Bitcoin ETP listed on the SIX Swiss Exchange, you don’t actually hold the Bitcoin yourself. Instead, you hold a security that represents a claim, like saying, “The issuer owes me the value of 1 BTC.” If Bitcoin goes up 10%, your ETP value increases accordingly. And because it’s a bearer instrument, whoever holds the ETP (you, or someone you sell it to later) owns that claim.

While crypto ETPs focus on digital assets, the ETP structure itself can also cover other categories, like:

i) Commodities (like tokenized gold such as PAXG (Paxos Gold) or synthetic oil tokens in DeFi)

ii) Equities (like tokenized shares of Coinbase, Tesla, or even synthetic stocks on protocols like Mirror or Synthetix)

iii) Bonds (such as blockchain-issued bonds from protocols like Ondo Finance, or real-world assets tokenized on-chain)

iv) Mixed baskets (like diversified crypto index tokens like DeFi Pulse Index (DPI) or BED Index blending BTC, ETH, and DeFi tokens)

How do you purchase a crypto ETP (and who manages it)

You purchase a crypto ETP just like you’d buy a stock (yes, directly on traditional stock exchanges like SIX, Xetra, or Nasdaq Stockholm) using your regular brokerage account (you don’t need to touch a wallet or learn how private keys work; you’re investing through the same channels you'd use to buy Apple or Amazon stock).

But behind the scenes, the ETP provider (who’s doing the heavy lifting for you) either:

A) holds the actual cryptocurrencies (typically stored in secure institutional-grade custody solutions like Coinbase Custody, Fireblocks, or BitGo (aka 0 stress about hacks or wallet recovery phrases),

or

B) replicates the crypto’s price using derivatives (like futures or swaps, basically financial instruments that track prices without needing to buy the asset itself).

Different types of ETPs in crypto?

Not all crypto ETPs are built the same, and they can be classified based on:

a. Underlying exposure

b. Product structure

c. Leverage and strategy

d. Jurisdictional behavior & wrapping

I. Underlying exposure

Crypto ETPs get their value in two main ways. Some actually hold real cryptocurrencies like Bitcoin in secure storage, giving you indirect ownership of the asset. Others don’t hold any crypto at all; they simply track the price using financial contracts like futures or swaps.

This difference shapes how the product behaves, the level of trust required, and the risks involved. Let’s break down both types so you know exactly what you’re getting into.

1. 🪙 Physically-Backed ETPs

“I would pick a physically backed bitcoin ETN and start from there. And shill… great addition to your portfolio imo!” u/Upper_War_846

How physically-backed ETPs work:

When you buy a physically-backed ETP, the company managing the product purchases real cryptocurrencies (usually from regulated exchanges like Coinbase, Kraken, or Bitstamp) on your behalf and stores them with professional custodians (such as Fidelity Digital Assets, Komainu, or Taurus; specialized firms that securely store digital assets using multi-signature wallets, air-gapped systems, and insurance-backed protocols).

You do not own the coins directly; instead, you own a share in the product (usually equal to a fraction of one unit of the underlying crypto, like 0.01 BTC or 0.1 ETH per ETP unit), which reflects the value of the crypto held by the provider.

The provider publishes details about the holdings (typically on their official website or through stock exchange filings such as factsheets or daily NAV reports) including how much crypto they hold, where it’s stored, and which custodian is responsible. If the custodian fails, gets hacked, or mismanages the assets (a rare but critical risk), your investment could be impacted. (To protect users, top custodians often use cold storage, insurance coverage, real-time audit trails, and regulatory oversight to minimize these risks.)

Keep in mind, you typically cannot redeem the actual crypto yourself. Instead, you buy and sell your ETP like a stock, on traditional exchanges.

Example ETPs:

a) 21Shares Ethereum Staking ETP (AETH)

b) SEBA Bank Bitcoin ETP (SBTC)

Use case: Long-term exposure to actual crypto without handling private keys.

Tax: Physically-backed ETPs are generally treated like traditional securities across the globe. What changes is whether gains are taxed, at what rate, and whether it's considered income or capital.

Want to go deeper? Read how Crypto ETFs work

2. 🧾 Synthetic ETPs

“ETF is paper coin, it's used to inflate the price. They can just print more any time, it's synthetic. Not real BTC.” lofigamer2

How synthetic ETPs work:

Synthetic ETPs do not buy real cryptocurrency like Bitcoin or Ethereum. Instead, they use financial contracts, such as CME Bitcoin Futures or perpetual swaps from Binance or Deribit (these are agreements to buy or sell crypto at a future price), to copy the price movements of the asset.

To put it simply, the ETP provider makes deals with banks or trading firms (called swap agreements or total return swaps, and they can last anywhere from a few days to several months). These agreements state:

“If Bitcoin goes up 10%, we’ll pay you 10%; just like if you held it yourself.”

(These contracts include conditions like price tracking formulas, daily margin updates, and who pays whom based on the difference between the starting price and the final price.)

Your ETP price follows the crypto market closely. But if the other party in the agreement (called a counterparty) can’t pay up, like in a crash or if their business fails, you might not get your full return. (This is called counterparty risk, and it’s one of the biggest downsides.)

To reduce risk, ETP providers often put in safeguards like:

• Working only with regulated or reputable financial institutions (e.g., Goldman Sachs, JP Morgan, Jane Street)
• Using collateral: extra funds or assets locked up to guarantee payment (e.g., U.S. Treasuries, stablecoins like USDC, or Bitcoin reserves held by custodians like Fidelity Digital Assets)
• Limiting exposure to any single counterparty (e.g., setting a 10% cap per institution like Citadel or Morgan Stanley to avoid over-reliance)
• Spreading the contracts across multiple firms—this is called diversification (e.g., dividing exposure between trading desks like Flow Traders, Wintermute, and Cumberland DRW)

Synthetic ETPs are often used in countries where holding real crypto is restricted or heavily regulated (like parts of Asia or traditional finance markets in Europe). But at the end of the day, you’re trusting that the other party will pay what they promised; thus, transparency and trust in the issuer are really important.

Example ETPs:

a) Leverage Shares 3x Long Solana ETP

b) VanEck Vectors Bitcoin ETN (VBTC)

Use case: Quicker to deploy, often used when direct custody isn’t feasible (e.g., jurisdictional bans).

Tax: May be treated as a derivative in some jurisdictions = different tax implications (e.g., ordinary income vs capital gains).

Curious how these compare to real ETFs? Explore the difference between ETFs and ETPs (and why it matters for investors).

II. Based on product structure

Crypto ETPs can either give you exposure to just one coin or a mix of several. The difference matters: one is more focused, while the other spreads out your risk.

Let’s break down the two types so you can see which suits your style.

3. 🧺 Single-asset ETPs

“I bought it the minute it was released and wouldn't hold BTC any other way after GBTC converted.” u/GrouchyAd9824

How do single-asset ETPs work:

A single-asset ETP is built to track the price of just one cryptocurrency—meaning your investment is entirely tied to that specific coin (e.g., BTC, ETH, SOL). When you purchase this kind of ETP, the value of your holding will rise or fall solely based on the performance of that one crypto. For example, if Bitcoin increases by 10%, the ETP’s price typically rises by the same percentage (because the product is structured to follow that coin exactly, without exposure to any others).

The ETP provider clearly outlines which coin the product tracks in official documents, usually found in a fact sheet (a short, 1–2 page overview with asset details, performance charts, and fees) or a prospectus (a longer legal document that explains the product’s design, risks, fee structure, and strategy). These are often published on the provider’s website or through the exchange where the ETP is listed (such as SIX Swiss, Xetra, or Nasdaq).

Most single-asset ETPs charge an annual fee (often around 0.25% to 1.49%), depending on the issuer (for example, 21Shares charges 1.49% for its Bitcoin ETP, while iShares from BlackRock charges 0.25%). This fee is automatically deducted from the ETP’s value over time and covers management and custody services.

Examples:

a) iShares Bitcoin Trust (IBIT)

b) ETC Group’s Solana ETP (ESOL)

Use case: Ideal for investors seeking exposure to one specific digital asset.

4. 🧃 Basket ETPs / index-tracking ETPs

“No easy way to perfectly replicate a market-cap-weighted top 100 crypto index yet, but there are options! ETFs are coming, but regulations are still evolving.” u/you_cant_see_me2050

How do basket ETPs/index-tracking ETPs work:

A basket ETP (also called an index-tracking ETP) holds a mix of different cryptocurrencies rather than just one (these are usually weighted by market cap, . These products are built to follow a predefined list of coins (called an index) in specific proportions (weights), similar to how traditional stock market index funds work (meaning bigger coins take up more basket space). When you invest in a basket ETP, your money is automatically spread across all the cryptocurrencies in that index, based on the weight assigned to each one (e.g., Bitcoin might make up 40%, Ethereum 30%, and smaller coins like Uniswap or Polygon the remaining 30%).

The ETP’s performance reflects the combined value movement of all the coins in the basket. If one coin goes up while another goes down, your return will depend on how much of each was held. These baskets are usually rebalanced on a regular schedule (i.e., monthly or quarterly) to maintain their intended weights (this means trimming the winners and adding to underperformers, similar to how equity index funds operate).

Some basket ETPs aim for broad exposure across the entire crypto market, while others focus on specific themes like DeFi, Web3, Layer 1 networks, or stablecoins. The product details, including which index it follows, how often it's rebalanced, and what fees apply, are explained in the provider’s fact sheet or prospectus (available on their official site or the listing exchange). These fees typically range from 1.0% to 2.5% per year, depending on the issuer and complexity of the basket.

Examples:

a) 21Shares DeFi Basket ETP (DEFII)

b) Vinter Layer 1 Index ETP

Use Case: Passive investing across sectors or themes.

III. Based on leverage and strategy

Some crypto ETPs are designed for more advanced strategies. These products use leverage to amplify gains (and losses) or inversion to profit when prices fall. Such approaches are typically categorized into:

5. ⚡ Leveraged Crypto ETPs

“Second, BITX is 2x leveraged, which means if BTC has a 50% drop (unlikely but not unheard of) my investment can quickly and easily go to zero.” u/RelevantPuns

How leveraged crypto ETPs work:

Leveraged ETPs are designed to boost your daily returns by using financial tools called derivatives (like futures contracts or total return swaps, which are basically bets on how the price will move).

These ETPs aim to give you 2x or 3x the daily movement of a cryptocurrency (for example, if Bitcoin goes up 5% in a day, a 3x ETP might go up 15% — but if Bitcoin drops 5%, the ETP could fall 15% instead).

To keep that multiplier working, the product manager has to reset all positions at the end of each trading day (this is called daily rebalancing, and it’s done to make sure the 2x or 3x target still applies the next day based on the new prices).

Because of this daily reset, the gains and losses add up in a compounding way, which means over time, especially in choppy markets, the ETP’s performance can drift away from what you'd expect if you just multiplied the long-term crypto price change by 2 or 3 (this effect is called volatility decay, and it can hurt long-term holders).

These products are usually high-risk and are best for short-term trades or specific strategies, not for holding over long periods (because over time, the compounding effect can lead to unexpected results, even if the coin eventually goes up).

Examples:

a) 21Shares 2x Ethereum ETP (ETH2X)

b) Leverage Shares 3x Long Bitcoin ETP

Use case: Short-term tactical trades.

6. 📉 Inverse ETPs

“These inverse bitcoin funds always look tempting… but read the fine print. It’s a ‘daily inverse’ fund. Meaning that you can still lose money from oscillations in prices that occur day after day, even if bitcoin’s dollar price trends down in the long term.” u/WishboneHot8050

How do inverse ETPs work:

Inverse ETPs are built using derivatives (like futures or swaps) to do the opposite of what a cryptocurrency does each day (for example, if Bitcoin’s price drops by 2% in a day, an inverse Bitcoin ETP is designed to go up 2% that same day — before fees and costs are applied).

To make this work, the ETP provider has to constantly manage and update their contracts (this is called daily rebalancing, and it ensures the product keeps moving in the opposite direction of the coin, every single day).

These ETPs are mainly used for hedging (which means protecting your portfolio if crypto prices fall) or for short-term trading strategies (like betting that the price of Bitcoin or Ethereum will go down soon).

But they’re not meant for long-term holding, because the daily reset can cause returns to behave unpredictably over time — especially in volatile markets where prices swing up and down.

Examples:

a) 21Shares Short Ethereum ETP (SETH)

b) GraniteShares 1x Short Bitcoin ETP

V. 📦 Based on jurisdictional behavior & wrapping

Not all crypto ETPs are created equal, and where they’re launched makes a huge difference.

The jurisdiction (country of regulation) and the legal wrapper (ETP, ETF, or ETN) define how the product is structured, who can access it, how it’s taxed, and what protections are in place.

Depending on the region, you’ll encounter two dominant models:

ETPs in Europe

In Europe, most crypto ETPs are structured as bearer debt securities (this means you’re technically lending money to the issuer, and in return, they promise your returns will follow the crypto asset’s price — like Bitcoin or Ethereum). These products are usually traded on major European exchanges like SIX Swiss Exchange in Switzerland or Xetra in Germany.

“Switzerland always ahead {in financial products].” u/kirtash93

Some ETPs physically hold crypto in secure storage through trusted custodians (BitGo, Taurus), while others use synthetic structures (price-tracking contracts like derivatives, total return swaps [TRS], or delta one certificates).

Notably, regulators like BaFin or FINMA require ETP issuers to publish a detailed document called a prospectus (it explains exactly how the ETP works, the risks, and who’s behind it) key investor information documents (KIIDs) or fact sheets (which summarize performance, costs, and exposure in simpler terms). Investor protection varies: some are collateral-backed (e.g., ETC Group’s BTCE, which holds actual Bitcoin in custody), others may expose you to issuer risk if something goes wrong (e.g., Grayscale’s GBTC, which came under fire for lack of redemption and transparency before converting to an ETF).

ETPs in USA

In the United States, crypto ETPs are structured as ETFs (Exchange-Traded Funds), and they follow strict rules under the 1940 Investment Company Act. Before any crypto ETF launch, it has to be approved by the SEC (the U.S. securities regulator), which checks things like: who holds the crypto, how prices are calculated, and whether the fund is being managed fairly.

“They fall under US jurisdiction and you need to ask yourself how much you trust the current or the next administration.” u/Flying-HotPot

They also look at whether the crypto being tracked is liquid enough (meaning it’s traded often and in big amounts), how easy it is to buy or sell shares of the ETF, and what risks investors are taking on. If anything seems shady or unclear, the ETF won’t be approved.

In particular, a key safety feature of U.S. ETFs is asset segregation (i.e., the fund’s crypto is stored separately from the fund manager’s own money). So even if the manager goes bankrupt, your crypto isn’t touched. ETFs are traded on big American stock exchanges like NYSE and Nasdaq, and similar to European counter-parts, usually use custodians like Coinbase Custody or Gemini Trust to hold the assets securely.

What is an ETP share and how to trade it?

All ETP types we covered, whether it’s a physically-backed Bitcoin ETP, a synthetic Ethereum product, a 3x leveraged Solana tracker, or even a DeFi index basket are packaged as tradable securities with ticker symbols, fiat pricing, and custodial backing (aka shares you can buy or sell on an exchange, just like stocks, giving you exposure to the underlying asset without holding it directly).

You buy them using a brokerage account, like Interactive Brokers, Charles Schwab, DEGIRO, or eToro, and the process is incredibly familiar to anyone who’s bought a stock or ETF: you search the ticker (e.g., “ABTC”), place a buy order, and hold that share in your brokerage portfolio.

But these aren’t like crypto tokens you hold in a wallet. You're not interacting with the blockchain. You're essentially buying a proxy, a promise, whose value tracks crypto prices, but without the direct control or composability DeFi is known for.

Final thoughts

If a portfolio proves itself (consistent returns, proper risk, and solid strategy) MC² Finance can turn it into a regulated financial product, just like an ETF or ETP. Except this one gets listed on the Swiss Stock Exchange (SIX).

That means your DeFi wallet strategy could one day be traded by family offices and asset managers across Europe. Backed by custodians. Reviewed by regulators. But still powered by real DeFi yields, like staking, lending, and yield farming (aka things traditional ETPs don’t touch).

So instead of just tracking price, these are a new type of ETPs: yield-generating ETPs (i.e., fully regulated, but born from on-chain performance).

👉 Got a winning strategy you believe in? Reach out to team@mc2.fi.

Frequently asked questions

What is an ETP used for in crypto?

Crypto ETPs simplify investing in digital assets for people who don’t want to deal with wallets or private keys. Instead of learning DeFi or managing security, you can just buy a share on a stock exchange (like how MC² Finance App lists its top performing crypto trading strategies).

Most people use ETPs to diversify (like owning BTC, ETH, and SOL in one product), spreading risk across assets that usually include top 5–10 cryptos by market cap. Institutions like them for the regulatory clarity (since they’re listed on exchanges like SIX or Xetra, with licensed custodians and official filings). For everyday users, ETPs remove complexity (no wallets, bridging, or DeFi steps) while still offering price exposure (if BTC pumps 20%, your ETP likely follows

But with traditional ETPs, you don’t control the assets. You can’t move, stake, or use them in DeFi. You're trusting a company to manage everything behind the scenes. MC² Finance fixes that with a new kind of crypto ETP; one that’s fully on-chain. Instead of just tracking price, it lets you copy real strategies built by top traders, backed by token-level analytics and scorecards. You still get diversification and easy access; but this time, you hold the keys, can earn DeFi yield, and stay in full control of your assets.

Why buy ETPs instead of Bitcoin or Ethereum directly?

Some people want crypto exposure but aren’t ready for wallets or exchanges. That’s why ETPs are popular; you use your normal broker, find the ticker, and buy a share minus the usual 30+ step crypto setup.

Institutions use ETPs because they’re regulated and easy to integrate into traditional portfolios. Retail users like the simplicity: no hacks, no keys, no wallet updates.

But you give up ownership. You can’t use the assets in DeFi or move them freely. You’re trusting an issuer. MC² Finance gives you a better alternative. Copy a portfolio, manage everything from your wallet, and skip the middlemen. It’s like an ETP/ETF, but transparent, flexible, and fully self-custodial.

What happens to an ETP if the company fails?

When you buy an ETP, you trust the issuer to hold the crypto and manage custody. If they fail, your assets may be safe with a custodian; but legal delays are likely. If custody isn’t airtight, you could lose funds.

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