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Tuesday, September 26, 2023

Cryptocurrencies and Security: Are They Easier and More Reliable with ETPs?

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For the past two years, tools that allow you to invest in cryptocurrencies without a wallet have been circulating in European markets: the ETPs. In 2020 there were 24, today there are more than 120.

Etp, what they are and why they are bought

An exchange traded product (literally “exchange traded product”) is a complex financial product (and therefore risky!) that replicates the movements of a range of indices, currencies or commodities. For example, if the price of gold rises or falls by 10%, the value of the related ETP rises in the first case and falls in the second case. The main advantage is the possibility to intervene on a wide range of effects with a single operation. That is, instead of buying individual shares of individual companies, the investor buys something that follows the trend of a series of assets. This reduces commissions and more convenient portfolio management. Also diversification, low costs and subsidized taxes are among the pluses.

When cryptos marry ETPs

But what happens if the combination takes place with digital coins? Around this idea grew the company 21Shares AG, which holds the world record of 33 combinations and nearly $3 billion in assets. Its first ETP paired with a basket of cryptocurrencies, dating back to 2018 and listed on the Zurich Stock Exchange. The goal is to simplify exchanges for traditional investors, allowing them to work with better-known assets of bitcoin and its derivatives. However, for the less experienced, it is an alternative to opening a wallet: a novice may have difficulty registering or storing long passwords. Both benefit from more efficient security technologies than the average citizen, as all ETPs are deposited with banks.

Etp, the fears of Italy

An essential condition for its use is therefore the opening of a current account with a credit institution. Not all of them anyway. The Italians generally do not offer this to their customers kind of products, which are not even traded on the Italian stock exchange. “Yet they are the most important innovation in asset management of the past 30 years and will be overcome in the next 15 years – says Massimo Siano, 21Shares manager for Southern Europe -. Fear holds back the change. Think of the internet: in the beginning we needed a desktop computer and a modem to connect. Meanwhile, future multinationals such as Amazon were already making profits online. This will happen for the blockchain, which is currently considered attractive only for niches such as art and video games”.

The financial nature of the ETPs

Caution. The strictly financial nature of ETPs distinguishes them by their high volatility. Therefore, the writer always recommends: seek help from a serious professional before heading out only under the swings of a market known only to insiders.

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Source: Corriere

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