Benefits of the ETP Structure for Crypto: Part II

July 7, 2021
In Part II of this overview, we examine how liquidity and standardization are two additional aspects of the ETP structure that could be beneficial for cryptocurrencies.

In part one, we looked at how cryptocurrencies can benefit from the transparency and security of Exchange Traded Products, or ETPs. In this video, we will talk about two frequently discussed aspects of ETPs.

The first aspect is liquidity, or the ease of trading and converting assets to cash. ETP structures have previously helped to develop liquidity in asset classes that were considered to have low liquidity, or where market access was an issue. Corporates, Treasuries and other bonds which might be expensive and difficult to trade are just one example of investments that benefited from the ETP structure.

By bringing different investor types into the same structure, ETPs help create a central core of liquidity, which can sometimes even surpass the underlying asset. This could be especially impactful in the crypto space where trading is happening across many unconnected venues with no common point of access or settlement infrastructure.

The second distinct aspect of ETPs is standardization. Standardizing product offerings for cryptocurrencies could grow the investment market as they offer a familiar route to trade, and help investors become more confident in allocating to these assets within their portfolios. Well-established ETP investors can leverage their existing trading and holding platforms, while still achieving exposure to digital assets.

This standardization of structure has helped provide clear and unified pricing for other asset classes; a trend that is likely to continue for cryptocurrencies. As we move toward a more digital future, simple and transparent market vehicles will continue to contribute to the advancement of new investment possibilities.