I recently researched different ways to invest in Bitcoin without having to worry about custody or storage, and I came across something interesting: ETFs and ETPs. It turns out many people confuse these terms, so I decided to dig a little deeper.

Let's start with the basics. An ETF, or Exchange Traded Fund, is simply a basket of assets that you can trade on a trading platform, similar to how you buy stocks. Imagine that instead of buying the 500 stocks of the S&P 500 index one by one, you buy a fund that groups them all together. The SPY is probably the most well-known ETF worldwide, and it works exactly like that.

Now, a Bitcoin ETF operates on the same principle. When you invest in one, you do not own Bitcoin directly, but you hold a certificate that proves your participation in the fund. The interesting part is that the returns are almost identical: when Bitcoin goes up, the ETF goes up; when it falls, it also drops. It’s a safer way to invest because you avoid the headaches of custody and storage.

But here’s what many don’t know: there is another instrument called ETP, or Exchange Traded Product. Although they sound similar, they have important legal differences. ETPs are technically structured debt products, not funds like ETFs. This means they are subject to different regulations.

The distinction between ETF and ETP is crucial to understanding the meaning of ETP in the regulatory context. While ETFs are regulated under collective investment fund laws, ETPs operate under a different legal framework. A historical example is the Amun ETP, launched in November 2018 on the Swiss SIX exchange. It was the first multi-cryptocurrency product of its kind, tracking the five main cryptocurrencies by market capitalization: Bitcoin (49.7%), XRP (25.4%), Ethereum (16.7%), Litecoin (3%), and Bitcoin Cash (5.2%).

The U.S. SEC has been quite restrictive with Bitcoin ETFs, requiring the cryptocurrency futures market to demonstrate sufficient stability. That’s why they have rejected multiple applications. However, with ETPs, there is no such restriction, which is why products like Grayscale’s Bitcoin Investment Trust are already operating in the United States.

In conclusion, both ETFs and ETPs offer a more accessible entry point for institutional and accredited investors into the crypto world. They eliminate the need to custody assets directly and significantly reduce operational risks. The key difference is that ETFs are more strictly regulated funds, while ETPs are bonds with a slightly different regulatory framework. Personally, I believe both instruments will play an increasingly important role in institutional Bitcoin adoption. Which of these two do you find more interesting for entering the crypto space?