Bitcoin's admission ETF's in the US is now beginning to gain influence in Europe. Competition is getting fiercer. What does this mean for investors?

The two U.S. financial giants WisdomTree and Invesco lowered the fees for their exchange-traded Bitcoin products (ETPs) early this week in a response to the introduction of favorable Bitcoin spot ETFs in the U.S.. First, Invesco announced a reduction in the total expense ratio of the "Invesco Physical Bitcoin ETP" from 0.99 percent to 0.39 percent. Then WisdomTree also lowered the annual cost of the "WisdomTree Physical Bitcoin ETP" from 0.95 percent to 0.35 percent. This could now lead to more competition in Europe as well for financial products that track the BTC exchange rate. Providers especially hope to benefit from increased institutional demand for Bitcoin.

Crypto-ETPs recorded inflows of 2.1 billion last year, with BTC accounting for 87 percent. Positive sentiment related to the possible approval of Bitcoin ETFs in the U.S. fostered this development as early as late 2023. However, the products are no ETFs, because the legal situation in the U.S. differs from that in Europe. There are no Bitcoin ETFs in Germany and Europe because of UCITS guidelines and there cannot be. An ETF must have a basic level of diversification in the EU.

ETPs not protected from bankruptcy

Unlike ETFs, ETPs are not special assets and are therefore theoretically not protected against provider bankruptcy. In practice, the difference is less relevant because many Bitcoin ETPs are characterized by a "physical" deposit of BTC. Thus, the providers buy the coins and store them for investors. For German retail investors, ETPs are currently offered by well-known neo-brokers such as Scalable Capital, Justtrade or Finanzen.net Zero. Still, buying Bitcoin directly remains the safest solution, as the principle applies: "No keys, no coins!".