Physically backed vs synthetic ETPs: what differs?

What does physically backed mean?

A physically backed crypto ETP is a security for which the underlying crypto-assets are held as backing. In a secured structure, those assets are pledged for the holders. The practical question is therefore not only how the security follows a crypto-asset's price, but also which assets its holders can turn to if the issuer cannot pay.

Virtune Bitcoin Prime ETP is a physically backed and secured example. Its Final Terms, dated 2 April 2026, identify Bitcoin as collateral and Coinbase Custody Trust Company LLC as custodian. Virtune does not lend out the underlying crypto-assets or use derivatives or synthetic instruments. Virtune pledges the assets for holders, while the collateral agent represents holders under the product agreements.

Crypto ETPs listed on Nasdaq Stockholm and Xetra include securities issued by Virtune. A listing or a shared underlying asset does not establish that different products use the same backing arrangement.

What is synthetic exposure?

Synthetic exposure means that the payment follows an asset or index through a contractual arrangement. For example, a synthetic ETF can obtain an index's performance through a swap agreement, under which counterparties exchange agreed payments. A crypto price-tracking security can instead promise a payment calculated from the crypto-asset's price.

Synthetic describes how the exposure is created. It does not mean that every synthetic product is unsecured. Exchange-traded notes, or ETNs, are securities issued by a company. ETNs may have collateral or be unsecured. The comparison below concerns physically backed and secured securities versus synthetic and unsecured securities. It does not rank their total investment risk, and it is not about leveraged or daily inverse products.

Hedging is not the same as collateral

An issuer that owes a Bitcoin-linked payment may buy Bitcoin to offset its own exposure. If Bitcoin rises, the issuer's Bitcoin holding can help offset the larger payment it owes. That is hedging: managing the issuer's price risk.

Collateral answers another question. Has the issuer pledged identified assets for the security holders, and who can exercise those rights for them? An issuer owning Bitcoin on its own account does not, by itself, give holders a pledge over that Bitcoin.

Price exposure and rights to collateral are separate questions

Question	Physically backed and secured	Synthetic and unsecured
What links the payment to crypto?	The underlying crypto-assets and the security's valuation terms	A contractual payment calculated from the crypto price
Are crypto-assets pledged for holders?	Yes, under the product's security agreements	No assets are pledged for holders in an unsecured security
If the issuer cannot pay	A representative can use the agreed collateral rights to pursue payment	Holders depend on the issuer's ability to pay and any separate company's duty to pay

Two examples from Swedish trading venues

Valour Bitcoin Zero SEK, ISIN CH0585378661, trades on Spotlight Stock Market in Sweden. Its Final Terms of 12 January 2026 describe securities that “synthetically track the performance of the price of Bitcoin in USD less a fee component”. The same document says: “There is no collateral, guarantee or other form of creditor protection available for investors in the Securities.” These are the product's own Final Terms, including the product summary, rather than a description of every product from that issuer.

Bitcoin Tracker One (COINXBT) is another Swedish-traded example. CoinShares XBT Provider AB (publ)'s Swedish base prospectus of 17 September 2026 uses the words “syntetiskt följer” and “icke-säkerställda”. In English, those expressions mean that the securities track the price synthetically and are unsecured. The Swedish words are quoted from the issuer's prospectus; the English explanation is a translation of their meaning.

The same prospectus states: “Certifikaten garanteras av CoinShares Capital Markets (Jersey) Limited”. This names the separate company that undertakes to pay under the terms of the guarantee. That company guarantee is different from crypto-assets pledged for holders, and does not turn the securities into physically backed, secured products.

How Virtune's collateral works

With Virtune Bitcoin Prime ETP, the investor holds the security in a brokerage account and Virtune arranges custody of the Bitcoin backing it. The investor does not handle the private keys. The wallet and ETP comparison explains private-key control and cold storage, the practice of keeping keys offline.

If Virtune cannot meet its obligations, the collateral agent represents holders and can exercise the contractual rights to the pledged assets. Assets can be sold and the proceeds used to meet amounts due under the securities after costs and any amounts that the agreements require to be paid first. Problems accessing or selling the assets can delay recovery. This is a route to recovery under the agreements, rather than a promise to return each investor's original purchase price. The base prospectus explains the recovery conditions and possible shortfall.

Where the distinction appears in the documents

A broker may place a security under a heading such as certificate or tracker. That heading does not establish whether assets are pledged for holders. The product's own Final Terms identify the series; its applicable prospectus and security agreements explain the payment and collateral rights.

A Virtune ETN holder owns the security. The amount and price of its underlying crypto-assets determine its calculated product value. The same documents identify the assets pledged for holders and the limits to recovery if the issuer cannot pay. Prospectus approval concerns the disclosure document, not a promise of repayment.