Crypto ETP. How Does It Help the Crypto Market?
By CryptoIndex on Altcoin Academy
In the traditional financial market, many tools are used as a tool to diversify risks. Today we will take a look one of them — ETP (Exchange Traded Product)
What is ETP?
Exchange-traded products (ETP) are types of securities that track underlying securities, indices, or other financial instruments. ETP’s are traded on the stock exchanges, which means that their prices can fluctuate from day to day and throughout the day. However, ETP prices are determined based on monitored investments.
ETPs also require a brokerage account to trade, so buying and selling ETP shares is likely to result in brokerage commission costs. Additionally, differences in the bid and ask — buy and sell — price could add to the cost of trading ETPs.
What is the difference between ETP and ETF?
ETPs are best defined as open-ended investments listed on the exchange and traded and settled like shares. They are passive investments aiming to replicate the performance of a given market, generally by tracking an underlying benchmark index. Being generally open-ended investments, they usually trade at or close to the net asset value.
While each ETP provider favors a slightly different definition, the general tendency both in the marketplace and the media is to use ETF and ETP as perfectly interchangeable terms. It is therefore important that investors make sure they understand what the provider is referring to when looking at these products.
The main difference between ETFs and ETPs is that the latter are debt securities instead of funds. Like exchange-traded commodities, exchange-traded currencies are secured debt securities
How can this affect the market?
The development of such classic tools tells many institutional investors that the cryptocurrency market is increasingly adapting to the traditional market, absorbing all the best from it.
Perhaps in a few years, we will observe how the traditional market also digitalizes all assets and between them, the gigantic abyss of misunderstanding that existed several years ago will practically disappear.
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