What are crypto equities ETPs? Investing in blockchain companies

Crypto equities ETPs offer an alternative way to gain exposure to the cryptocurrency ecosystem—not by holding digital assets directly, but by investing in the companies building and operating in the space.

What are crypto equities ETPs?

Crypto equities ETPs are exchange-traded products that track baskets of stocks from companies involved in cryptocurrency and blockchain technology. Instead of holding Bitcoin or Ethereum, these products hold shares in mining companies, exchanges, blockchain developers, and other crypto-related businesses.

They function like traditional equity ETPs but focus specifically on the cryptocurrency sector. You gain exposure to the growth of the crypto industry through the companies profiting from that growth.

What types of companies do they include?

Crypto equities ETPs can include all companies related to the digital asset industry, either directly involved players or intermediaries:

• Bitcoin miners: Companies like Marathon Digital, Riot Platforms, and CleanSpark that operate large-scale mining facilities. Their revenues are directly tied to Bitcoin's price and mining economics.

• Cryptocurrency exchanges: Publicly traded exchanges like Coinbase generate revenue from trading fees and custody services. Their performance correlates with crypto market activity.

• Blockchain technology companies: Firms developing blockchain infrastructure, enterprise solutions, or crypto-native applications. This includes both pure-play crypto companies and traditional tech firms with blockchain divisions.

• Hardware manufacturers: Companies producing mining equipment (like the former Bitmain-associated firms) or crypto-related semiconductors.

How do they differ from physical crypto ETPs?

Physical crypto ETPs hold actual cryptocurrency—your investment directly tracks Bitcoin or Ethereum prices. Crypto equities ETPs hold company stocks—your investment tracks how well those businesses perform.

This creates different risk and return profiles. A mining company's stock might rise more than Bitcoin during bull markets (operational leverage) but could also fall more during downturns due to fixed costs and debt obligations.

Crypto equities also carry company-specific risks: management decisions, competitive pressures, regulatory challenges affecting specific businesses, and general equity market conditions.

What are the benefits of crypto equities ETPs?

• Familiar structure: For investors comfortable with equity ETPs but hesitant about direct crypto exposure, crypto equities offer a more traditional investment wrapper.

• Diversification within crypto: A basket of crypto-related stocks provides exposure across different business models—miners, exchanges, technology providers—rather than concentration in a single asset.

• Dividend potential: Unlike cryptocurrencies, some crypto-related companies pay dividends, providing income alongside potential capital appreciation.

What are the risks?

There are several risks associated with crypto equities ETPs, but some of them are not specific to the nature of these companies. 

• Double volatility: Crypto equities combine crypto market volatility with stock market volatility. A mining stock might fall due to Bitcoin price drops, broader equity market corrections, or company-specific issues—sometimes all at once.

• Operational risks: Companies face challenges that don't affect crypto directly: equipment failures, power cost increases, management missteps, competitive pressures, and regulatory actions against specific businesses.

• Correlation isn't perfect: Crypto equities don't always move in lockstep with crypto prices. Company fundamentals, earnings reports, and equity market sentiment all influence performance.

• Concentration risk: The crypto equities universe is relatively small. Many products are heavily weighted toward a few large mining companies and Coinbase.

• Potential leverage: Mining companies and exchanges can outperform crypto during bull markets because their profits may grow faster than crypto prices rise. Operational leverage amplifies returns in both directions.

How do they fit in a portfolio?

Crypto equities ETPs can complement direct crypto exposure rather than replace it. Holding both provides exposure to crypto price appreciation (through physical ETPs) and to the businesses benefiting from crypto adoption (through equities).

Some investors prefer crypto equities when they want crypto-correlated returns within a pure equity portfolio—particularly in accounts that might not permit direct crypto or crypto-backed products.

Consider your overall equity allocation when adding crypto equities. They're stocks first and crypto exposure second; they'll move with equity markets as well as crypto markets.

What should you look for in a crypto equities ETP?

Different criterias can help you to make your ultimate decision before getting exposure to crypto equities: 

• Index methodology: Understand how the underlying index selects and weights companies. Some focus purely on crypto-native businesses; others include traditional companies with blockchain exposure.

• Concentration: Check the top holdings and their weightings. A product dominated by two or three stocks provides less diversification than one with broader exposure.

• Geographic coverage: Some products focus on US-listed companies; others include global crypto businesses. Consider whether you want international exposure.

• Fees and liquidity: Compare expense ratios and trading volumes with alternative products offering similar exposure.

Key Takeaways

• Crypto equities ETPs invest in companies operating in the cryptocurrency sector, not crypto itself

• Holdings typically include miners, exchanges, and blockchain technology companies

• They offer potential leverage to crypto markets but with additional company-specific risks

• Performance correlates with but doesn't perfectly track cryptocurrency prices

• They can complement physical crypto ETPs in a diversified portfolio