ETPs are the vehicle of choice for European professional investors seeking exposure to bitcoin, according to research from ETC Group.
Over half of European professional investors investing in bitcoin use ETPs to gain their exposure.
The specialist issuer of crypto-backed ETPs recently surveyed 66 institutional investors and wealth managers that collectively oversee $63.5 billion in assets across Germany, the UK, Italy, the Netherlands, Belgium, and the Nordics. All those surveyed currently invest in bitcoin.
The study found that over half (53%) use ETPs to access bitcoin, while about a quarter (23%) use structured products and only one in five (21%) use direct investment. Just 17% use hedge funds.
The research also revealed a strong appetite for bitcoin exposure with nearly nine out of ten (87%) of those surveyed indicating that they plan to increase their exposure to bitcoin in 2021 and four-in-five (80%) expecting the USD price of bitcoin to rise over the course of the year.
Bradley Duke, CEO of ETC Group, commented: “We welcome the exciting findings of this pan-European market research we commissioned. There are a growing number of investment vehicles open to investors looking to gain exposure to bitcoin and other cryptocurrencies. ETPs have a number of advantages over some of these in terms of the liquidity and transparency which they provide, superior custodial services, and more competitive fees.”
ETC Group debuted its maiden product – the Bitcoin Exchange Traded Crypto ETP – in June 2020 in partnership with European white-label ETF issuer HANetf. The product, which became the first directly backed bitcoin ETP to be centrally cleared, has quickly established itself as a leading vehicle for bitcoin exposure amongst European professional investors with current assets under management of $940 million, as of Thursday 18 February 2021.
The ETP is directly backed by bitcoin which is stored using an institutional-grade custody solution. Bitcoin holdings are audited using a transparent and verifiable process.
It is listed on Xetra (BTCE GY) and SIX Swiss Exchange (BTCE SW) and comes with an expense ratio of 2.00%.
Duke said: “A product like BTCE, which is traded on major stock exchanges and is central counterparty cleared, can help institutional investors gain access to the cryptocurrency market. It also simplifies the process of allocating to bitcoin. Investors bypass the technical challenges of purchasing and storing bitcoin and the risk of trading on unregulated crypto exchanges. Through an ETP, investors aren’t required to engage with blockchain technology at all.
“BTCE has quickly become the most-traded crypto-backed ETP on Xetra and has no discount or premium which is inherent in bitcoin futures and US-based bitcoin trusts. Given the consistent high liquidity and efficient tracking of the underlying bitcoin price, we feel very confident that the institutional investors surveyed in this market research will see BTCE as the market access product of choice for their bitcoin exposure.”
WisdomTree and 21Shares also offer competing products in Europe. The WisdomTree Bitcoin ETP (BTCW SW) has $320m AUM and comes with an expense ratio of 0.95%, while the 21Shares Bitcoin ETP (ABTC SW) houses $280m and costs 1.49%.