2023-04-27 08:00:00
Cryptocurrencies are becoming increasingly popular. But what are ETP, ETC and ETN? What risks do investors have to reckon with and what still prevents many investors from betting on cryptos? The former crypto critic and current lover Townsend Lansing from Coinshares talks about this in an interview.
DAS INVESTMENT Academy: Mr. Lansing, you are product manager at crypto ETP provider Coinshares, how did your enthusiasm for cryptos start?
Townsend Lansing: To be honest, I used to be more of a crypto critic. Nevertheless, in 2015 I started investigating at my old employer whether it would be worth launching a crypto ETP. At that time I came to the conclusion: The risks are too great. Then – in 2017 – I gave the idea another chance. My realization at the time: It’s at least worth finding out if you’re allowed to do it. After that I got more and more interested in development – it was just impossible not to do it. I then launched my first crypto ETP with Coinshares and now I can no longer disagree when people say: “Cryptos are here to stay.“
For beginners again very basic: What are ETFETP, ETN und ETC?
Lansing: First of all, all three types of products are exchange-listed, which means they are traded on the exchange.
A ETF (Exchange Traded Fund) is a index fundthe the performance of an indexsuch as the Dax – i.e. the 40 strongest companies in Germany – depicts. Also are ETFs Ucits-konform and after that regulated by EU directives. How active funds are they considered special assets led, whereby in the event of insolvency of the provider, the assets remain reserved for investors.
With ETPs (Exchange Traded Products) investors can access the course development von Stocks, bonds, commodities or currencies set. The Expression summarizes both etc as well as ETNs together.
etc (Exchange Traded Commodities) set up raw materials like for example Gold or Silber. Legally, it is debentures of the issuer. Also ETNs (Exchange Traded Notes) sind debentures, which are linked to the performance of a specified market index. However, an ETN can also refer to a single value and thus, for example, the course development the Cryptocurrency Bitcoin map one to one.
What are the differences between the individual products?
Lansing: Unlike ETFs, at ETCs and ETNs Credit Risks a role. Because of this, both are product types not Ucits compliant and ask no special fund dar. Which means they enjoy at a insolvency of the issuer or the custodian bank no special protection.
And what is the difference between ETNs and ETCs?
Lansing: The difference – especially in the crypto area – is not too big and is more of a conceptual nature. Who wants to invest in crypto ETPs should not ask ETC or ETN, but is there a credit risk? And if so, is it worth the risk?
Besides credit risk, what other uncertainties do ETNs and ETCs pose for investors?
Lansing: The Main risk arises from the value that is mapped, such as cryptocurrency. Which means: When you buy a bitcoin ETP, the main risk is that the bitcoin will lose value. A risk that also exists with ETFs.
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One of the things crypto stocks are known for is that they are either among the top or flop investments. Why is it that investors have to endure such large fluctuations?
Lansing: The Main reason is that Kryptos is still a very young asset class are. With many Investors are more about trading, than holding values for long, which is what makes the investment so volatile. Another problem is that many Investors are still waiting for cryptocurrencies to be adopted by society. And every time there is a sign of this – like the mica regulation in Europe – it triggers renewed fluctuations through acquisitions or sales.
Some cryptocurrencies like Bitcoin are also often referred to as digital gold. The precious metal is particularly in demand in times of high inflation, as it is generally said to protect against inflation. Can the same be said of crypto assets?
Lansing: That Protect crypto assets from inflationis still as far as I know not proven. However, what can be said: The more fearful investors are, the more popular digital currencies are. The recent turbulence at the banks, for example, has given bitcoin a renewed boost.
For what reason?
Lansing: Investors were looking for one Alternative to traditional means of payment for fear that more banks will go bankrupt. Which does not equate crypto assets with gold. Rather, the more problems there are with conventional currencies, such as the US dollar or the euro, the more crypto interest increases.
Many investors fear losing their crypto assets to cyber attacks. Is the danger really that real and how can investors protect their assets?
Lansing: Cyber attacks count definitely to the real ones Dangers of cryptocurrencies. For this reason, I would bet on ETPs, as that is where custody is given away. With your own wallet, on the other hand, you are more susceptible to criminal attacks.
Do you have any idea what else prevents investors from betting on crypto assets?
Lansing: The main problem is that many are still waiting. Especially institutional investors who want to see whether this asset class is established. Other reasons, as already mentioned, are the height volatility and the Questions about regulation. While some investors are extremely convinced of crypto, most are still skeptical about digital currencies and wonder if this asset class will survive at all.
What would help drive the adaptation forward?
Lansing: Explaining and Educating. As an ETP issuer, it is our job to convince people that investing part of their portfolio in crypto is worthwhile.
And how well does your persuasion work?
Lansing: It varies: Twelve months ago, investors were still keen to get in touch with us and learn more about cryptos. However, after the FTX bust, that interest cooled. The thirst for knowledge was reignited by the ensuing banking turmoil. But that doesn’t mean that everyone is now investing like crazy. No, people just want to know how things are going and what opportunities the market offers. And I think this back and forth will continue for a while, but at some point the demand will solidify.
What are the reasons for crypto investments in the long term?
Lansing: Saying that for the crypto market as a whole is difficult. But specifically on Bitcoin related, it can be stated that the Currency an alternative to conventional means of payment offers. In addition, cryptos play a completely different role on a global level: we have one in Germany stable currency, but this is not the case everywhere. And where that’s not the case, Bitcoin can be an option.
Finally, what percentage of their portfolio should investors invest in cryptos?
Lansing: That is depending on the risk type. There are people who hold on 2 to 5 percent in the portfolio before to in Leverage Products to invest – why Kryptos can belong. The opportunity: Due to the high volatility, investors can generate higher profits, but of course also have to accept larger losses. In the end, you need a risk buffer to endure it.
About the interviewee:
Townsend Lansing has been Head of Product at Coinshares since 2019. His responsibilities include developing and launching digital assets. Townsend is a lawyer and, as a native American, can assess regulatory developments in the US and in Europe.
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