Advantages of crypto ETFs
Crypto ETFs offer numerous benefits, making them an attractive investment option for many investors. They combine the opportunities of the crypto market with the simplicity and security of traditional financial products.
Key advantages at a glance
Easy access to cryptocurrencies – Crypto ETFs allow you to benefit from the price movements of digital assets without having to deal with buying and managing cryptocurrencies directly
Regulated environment – Since crypto ETFs are monitored by financial regulators, investors benefit from a high level of security and transparency
Liquidity – Crypto ETFs can be traded on exchanges like stocks, allowing for quick buying and selling
Seamless integration into existing investment strategies – You can add crypto ETFs to your portfolio just as easily as other exchange-traded funds, without needing additional tools or platforms
No need for wallets – Since you don’t hold cryptocurrencies directly, you don’t have to set up a wallet or manage private keys
Physical backing – Crypto spot ETFs are physically backed, meaning the corresponding cryptocurrency is purchased and held as collateral
What are the disadvantages of crypto ETFs?
Despite their benefits, crypto ETFs also come with certain drawbacks, which should be carefully considered before investing. Some risks and limitations are specific to crypto ETFs, while others apply to all exchange-traded products.
Key disadvantages at a glance
Higher costs – Crypto ETFs often have a higher expense ratio than traditional ETFs, which can impact long-term returns
Tracking errors – The performance of a crypto ETF may differ from the actual price movements of the underlying cryptocurrency, especially with synthetic products
Limited selection – In Germany, only XRP ETFs are currently available. Investors interested in other cryptocurrencies must consider alternatives such as ETPs or direct investments
Regulatory uncertainties – Crypto ETFs are subject to legal and regulatory risks, which can affect their availability and structure
No direct ownership of cryptocurrencies – Since crypto ETFs provide indirect exposure to cryptocurrencies, you cannot benefit from staking or using coins within the crypto ecosystem
Volatility – The high price fluctuations of cryptocurrencies also impact crypto ETFs, making them a higher-risk investment
While crypto ETFs come with risks, you can minimise them through strategic choices:
Compare expense ratios across different ETFs
Prefer physically backed products
Stay informed about new market offerings
Choose established issuers
Combining crypto ETFs with direct investments can provide greater flexibility and additional benefits, such as staking. Long-term strategies like savings plans can help mitigate volatility and manage investments more effectively.
Alternative to crypto ETFs: Investing with Bitpanda
If crypto ETFs feel too restrictive, or if you want a wider selection of cryptocurrencies, direct investment through Bitpanda could be an attractive alternative. Bitpanda offers a user-friendly platform where you can buy, hold, and diversify cryptocurrencies—without the limitations of ETFs.
Advantages of investing with Bitpanda
Full control over your cryptocurrencies – Unlike crypto ETFs, you own the coins and tokens, allowing you to use them for staking, trading, or other crypto ecosystem activities
Wider selection – Bitpanda provides access to a broad range of cryptocurrencies, not just Bitcoin and Ethereum
Greater flexibility – Invest whenever and however you like, without being restricted by exchange trading hours
Low entry barriers – Start investing with small amounts and gradually build your portfolio
Easy diversification – With Bitpanda Crypto Indices, you can automatically invest in a diversified portfolio that is regularly rebalanced
Savings plans – Set up automatic crypto savings plans to benefit from the cost-average effect and reduce exposure to market fluctuations
Why Bitpanda is a practical alternative
User-friendly platform – Intuitive for both beginners and experienced investors
High security – Regulated by European financial authorities with strong asset protection
Lower fees – Compared to many crypto ETFs, Bitpanda often allows for cheaper investments, leaving more of your returns intact
Conclusion: Investing successfully in cryptocurrencies
Crypto ETFs can be a convenient way to invest in digital assets like Bitcoin or Ethereum without needing to own them directly. They provide regulated and straightforward access to the crypto market. However, the current selection is limited, with XRP ETFs being the only option available in Germany.
One drawback: If you invest in an XRP ETF, you do not own the coins. This means you cannot use them within the crypto ecosystem—you only benefit from price movements.
Alternatively, Bitpanda allows direct investments in a wide range of cryptocurrencies, offering more flexibility and additional features such as staking. Whether crypto ETFs or direct investments are the better choice depends on your individual goals, risk tolerance, and knowledge of the crypto market.
A careful comparison of advantages and disadvantages will help you make an informed decision and invest successfully in cryptocurrencies.
Frequently asked questions about crypto ETFs
Here are answers to some common questions about crypto ETFs.
Which crypto ETF is the best?
The best crypto ETF for you depends on your investment goals and preferences. Many investors prefer physically backed ETFs, as they offer greater security and transparency while closely tracking the real-time value of the cryptocurrency.
Since only XRP ETFs are currently available in Germany, your choice is limited. ETNs on cryptocurrencies can be an alternative, but they do not physically hold the asset—instead, they use derivatives and leverage and are classified as exchange-traded debt securities, not funds.
How do I compare crypto ETFs?
When comparing crypto ETFs, consider the following factors:
Total expense ratio (TER) – A lower TER means higher net returns
Physical vs synthetic backing – Physically backed ETFs hold actual cryptocurrencies and closely track their market price
Liquidity – Choose ETFs traded on established exchanges
Issuer and regulatory framework – Invest with trusted issuers that operate under strong financial regulations
Is a crypto ETF savings plan a good idea?
A crypto ETF savings plan is ideal for long-term investors who want to invest regularly in cryptocurrencies. By making monthly deposits, you can benefit from the cost-average effect, which helps smooth out price fluctuations over time. This is especially useful for investors with a long-term strategy.
Where can I buy crypto ETFs?
You can purchase crypto ETFs through traditional brokers or stock exchange platforms that offer access to ETFs. Currently, three European exchanges have listed crypto ETFs:
SIX Swiss Exchange
Euronext
Xetra
What is the difference between traditional ETFs and crypto ETFs?
Traditional ETFs track indices of assets such as bonds, commodities, or stocks, whereas crypto ETFs track the price movements of cryptocurrencies.
Crypto ETFs are often more volatile
Traditional ETFs typically include multiple assets, offering broader diversification
Crypto ETFs generally focus on a single cryptocurrency
More topics on cryptocurrencies
Whether you’re looking to get started with crypto trading or explore the latest trends, the Bitpanda Academy offers a wide range of guides and tutorials. Learn about blockchain networks, key trading indicators, and much more!
