What is a crypto ETN?
Summary
A crypto ETN is an exchange-traded note: a listed debt instrument designed to track a cryptocurrency or crypto index. It offers price exposure through a brokerage account without requiring investors to manage private keys. Virtune's crypto ETNs are non-interest-bearing and physically backed by the crypto assets they track.
- An ETN is a debt instrument; an ETF is a fund; ETP is the wider exchange-traded category.
- Physical backing holds crypto assets as collateral; other ETNs can have different collateral arrangements or none.
- The investor owns the note, whose price can differ from the underlying crypto because of fees and trading costs.
What is a crypto ETN?
ETN stands for exchange-traded note. A crypto ETN is a listed debt instrument designed to track a cryptocurrency or crypto index. A Bitcoin ETN, for example, gives investors Bitcoin price exposure through a brokerage account without requiring them to manage private keys. Nasdaq classifies ETNs as listed debt notes on its Nordic markets.
An ETN is one type of exchange-traded product (ETP). Virtune's ETPs are non-interest-bearing and physically backed. The investor owns the note, while the underlying crypto assets are held as collateral. An ETF is another type of ETP, but it is a fund. The ETP explainer sets out the broader category.
ETN, ETF and ETP
ETN, ETF and ETP describe different things
| Term | What it means | What the investor owns |
|---|---|---|
| ETP | The wider exchange-traded category | Depends on the product's legal form |
| ETF | A fund traded on an exchange | Units in a fund |
| ETN | A debt instrument traded on an exchange | A claim against the issuer, which may be supported by collateral |
An ETN is still a note even when it trades alongside ETFs at a broker. A fund investor owns fund units; a note investor has a claim against the issuer. The UCITS fund rules apply to funds, while securities offering rules cover the disclosure for notes.
What backs a crypto ETN?
An ETN may be collateralized or uncollateralized. Virtune's physically backed crypto ETPs hold the underlying crypto assets as collateral with a custodian. A collateral agent represents investors in matters concerning the collateral.
What backs a particular note is set out in its product terms; the asset whose price it tracks does not answer that question. Physical backing does not turn a note into a fund.
Price tracking and trading
The note's value is linked to its underlying crypto-asset or index. A management fee reduces its value over time; the price paid on an exchange can also differ because of the bid-ask spread and trading hours. Two notes linked to bitcoin can therefore give different outcomes even when bitcoin's price move is the same.
Risks of a crypto ETN
Cryptocurrency prices can fluctuate significantly, including while the stock exchange is closed. This can cause the ETN's price to change sharply when trading resumes. Investors also face risks related to the issuer, the collateral and its custodian. For practical purchase steps, see how to buy a crypto ETP.
Virtune products in this area
View all products
Sources
- Nasdaq: ETN/ETC on Nasdaq Nordic
- Virtune Investor Relations: Prospectus
- Official Journal of the European Union: Directive 2009/65/EC (UCITS)
- Official Journal of the European Union: Regulation (EU) 2017/1129 (Prospectus Regulation)
- Deutsche Börse: About ETF, ETN, ETC and ETP
- Virtune Investor Relations: Collateralization Methodology
