The cryptocurrency market has long ceased to exist separately from traditional finance. Bitcoin is traded not only on crypto exchanges, but digital assets are increasingly becoming the underlying assets for instruments familiar to the stock market. One such instrument is an ETN, or exchange-traded note.
For investors, the idea looks fairly simple: instead of buying Bitcoin, Ethereum, or another cryptocurrency directly, they purchase a security whose value tracks the price of the digital asset.
No private keys, hardware wallets, or transfers between blockchain addresses are required. The transaction happens through a conventional broker—almost the same way as buying shares. Convenient? Yes. But behind this simplicity are several important nuances.
What is an ETN in cryptocurrency?
ETN stands for Exchange-Traded Note — a debt security that tracks the value of a specific asset or index.
In the case of a crypto ETN, the underlying asset is a cryptocurrency, such as Bitcoin, Ethereum, or Solana.
Essentially, the investor is not buying the coin itself, but an obligation issued by a financial institution whose value moves with the price of the selected crypto asset.
If Bitcoin rises in value, the price of the linked note will usually follow. If Bitcoin falls, the investor will feel the impact almost as quickly.
The key difference lies in the legal structure. The holder of a crypto ETN does not own Bitcoin itself. What they hold is a traditional security.
Financial companies and specialized providers of exchange-traded products issue these instruments. Some of the best-known participants in this market include CoinShares, 21Shares, VanEck, WisdomTree, and others.
ETNs trade on regulated stock exchanges, such as the London Stock Exchange (LSE) or the SIX Swiss Exchange. Investors can buy and sell crypto ETNs through a broker during exchange trading hours, much like traditional shares. Each ETN has its own short exchange code — a ticker — which investors can use to find the instrument in their trading platform.
How crypto ETNs work
Imagine an investor who wants to profit from a rise in Bitcoin but does not want to deal with cryptocurrency exchanges, wallets, and private keys.
They open a brokerage app and buy a Bitcoin ETN. A security linked to Bitcoin appears in their account. The investor does not receive any BTC itself. What happens next largely depends on the specific financial product.
Many European crypto ETNs are physically backed by actual cryptocurrency. This means the issuer purchases Bitcoin, Ethereum, or another digital asset in an amount corresponding to the notes issued and transfers it to a specialized company for safekeeping — a custodian*.
* Custodian — an organization that professionally holds assets on behalf of clients. In the case of cryptocurrency, it securely stores private keys and protects digital assets from theft or unauthorized access.
For large investors and issuers, cryptocurrency custody is particularly important. When digital assets worth millions or even billions of dollars are involved, simply transferring them to a hardware wallet and putting the device in a safe is not enough. A multi-layered security system is required to reduce the risk of theft, loss of private keys, and unauthorized access.
That is why professional custodians use specialized infrastructure: they distribute access rights among multiple employees, apply multi-factor authentication, store backup copies of keys in different secure locations, and establish strict procedures for conducting transactions involving the assets.
A significant portion of the cryptocurrency is also kept in so-called “cold” storage*.
* “Cold” storage — a method of storing cryptocurrency in which private keys are kept in an isolated environment without a permanent connection to the internet. This significantly reduces the risk of remote hacking and theft of digital assets.
At the same time, investors should understand that the amount of cryptocurrency backing a product does not mean that one ETN must correspond to the price of an entire Bitcoin. The issuer determines what fraction of the underlying asset each note represents.
For example, the value of one ETN may be linked to 0.01 BTC or an even smaller fraction of a Bitcoin. As a result, investors do not need to invest an amount equal to the price of one whole BTC: they can purchase fewer notes and gain exposure to Bitcoin’s price movements starting with a relatively small amount of capital.
Why investors buy crypto ETNs
The main appeal of cryptocurrency ETNs for investors is their familiar infrastructure.
For many large investors, cryptocurrencies remain an unusual asset class. They must choose a crypto exchange carefully, register an account, withdraw coins, store private keys, and manage the security of digital assets themselves.
Crypto ETNs remove much of this complexity. Investors use the same broker they use to buy shares or bonds. Cryptocurrency effectively becomes just another line item in a traditional investment portfolio.
This format is particularly convenient for large companies, funds, and other professional investors whose internal policies or regulatory requirements may prohibit them from purchasing and holding cryptocurrency directly. With crypto ETNs, they invest not in Bitcoin or Ethereum itself, but in a conventional security whose price tracks the value of the chosen cryptocurrency.
ETN vs. ETF: similar only at first glance
Crypto ETNs and ETFs are often discussed together—both instruments trade on exchanges and provide exposure to a particular asset without requiring investors to purchase it directly. Legally, however, there is a fundamental difference between them.
An ETF is an exchange-traded fund. By purchasing its shares, an investor acquires an interest in a fund that either owns the underlying assets or constructs a portfolio so its value tracks the performance of a selected index, commodity, or cryptocurrency.
An ETN works differently. It is a debt security issued by a financial company. By purchasing an ETN, the investor does not acquire a stake in a fund or become the owner of the underlying asset. In essence, they become a creditor of the issuer.
This is why so-called counterparty risk matters so much more for crypto ETNs.
If the issuer of a crypto ETN faces serious financial difficulties or goes bankrupt, investors may not receive the payments owed to them in full. This is because a crypto ETN is a debt obligation of the issuing company, meaning that the issuer’s financial condition directly affects noteholders.
An ETF generally has a different structure. The fund’s assets are legally separated from the assets of the management company. Therefore, even if the management company itself experiences financial difficulties, the assets belonging to the fund should not automatically be used to repay the company’s own debts.
This does not mean that ETFs are completely free of risk or that crypto ETNs are necessarily dangerous. However, the nature of these risks differs — and investors should understand that distinction before making a purchase.
What makes crypto ETNs convenient?
The main advantage is obvious: crypto ETNs simplify access to digital assets. Investors don't need to create a cryptocurrency wallet, write down a seed phrase, or worry that a crypto transfer went to the wrong address.
Crypto ETNs can also be easily incorporated into an existing investment portfolio. Through a single broker, investors can simultaneously hold shares, bonds, ETFs, and an instrument linked to Bitcoin.
Other advantages of cryptocurrency ETNs include:
- familiar stock-market infrastructure;
- no need to store cryptocurrency independently;
- the ability to gain exposure to cryptocurrencies through a broker;
- convenient securities accounting;
- the ability to invest in several cryptocurrencies at once through thematic products.
For some investors, convenience itself becomes the decisive argument in favor of crypto ETNs.
What risks do crypto ETNs carry?
It is important to understand that buying cryptocurrency exposure through an ETN does not make the investment itself safer. The investor still depends on the price of Bitcoin, Ethereum, or another underlying asset and therefore remains exposed to the risk of a sharp decline in its value.
If Bitcoin loses 30% of its value, a Bitcoin ETN will also come under significant pressure. The security format cannot eliminate the volatility of the underlying asset.
Moreover, additional factors are added to market risk. The first is the issuer risk mentioned above.
The second is fees. Managing an exchange-traded product costs money, which means issuer and broker expenses gradually reduce part of the investor’s return.
The third consideration is trading hours. The cryptocurrency market operates around the clock, seven days a week. Stock exchanges, on the other hand, operate only during established trading hours. If Bitcoin moves sharply overnight or during the weekend, a crypto ETN investor may not always be able to react immediately.
There are also legal considerations. The fact that a security is traded on a regulated exchange does not automatically mean that the government guarantees the investment. Investor protections differ by jurisdiction, so review the documentation for a specific crypto ETN before buying.
Crypto ETN or actual Bitcoin?
The choice between a crypto ETN and buying cryptocurrency directly depends on what exactly the investor needs.
If they are interested solely in changes in the price of Bitcoin or another cryptocurrency, a crypto ETN may be a convenient option. You don't need to create a wallet, store private keys, or independently conduct transactions involving digital assets.
However, this approach has an important limitation — the buyer of a crypto ETN does not become the owner of the cryptocurrency itself. Instead, they receive a security linked to its market price. As a result, the asset cannot be transferred to another crypto wallet, used in DeFi services, or directly managed on the blockchain.
With a direct purchase of Bitcoin, the situation is different: the investor receives the cryptocurrency itself and, if they store it in their own non-custodial wallet, independently controls access to their funds.
This is why the difference between a crypto ETN and the direct purchase of cryptocurrency is not limited to the method of investing — it also concerns who actually controls the asset.
The well-known principle “Not your keys, not your coins” reflects this very idea: anyone who does not control the private keys does not have full technical control over the cryptocurrency.
On the other hand, self-custody of cryptocurrency also requires responsibility. A lost seed phrase, a damaged hardware wallet, or an incorrect transfer can result in an irreversible loss of funds.
Crypto ETNs therefore effectively offer a compromise: less technical responsibility in exchange for greater reliance on financial intermediaries.
What crypto ETNs exist?
The European cryptocurrency ETN market has been developing for several years, and today investors can access products linked to both individual cryptocurrencies and entire baskets of digital assets.
Bitcoin Tracker One
One of the well-known early crypto ETNs is Bitcoin Tracker One (COINXBT) from XBT Provider. It appeared before the current wave of institutional interest in cryptocurrencies and gave investors the ability to track the price of Bitcoin through a traditional brokerage account.
The provider later launched a similar Ethereum product — Ethereum Tracker One (COINETH).
For the European market, such instruments became some of the first bridges between traditional stock-market infrastructure and cryptocurrencies.
Crypto ETNs from VanEck
VanEck’s product range includes exchange-traded instruments linked to Bitcoin, Ethereum, and other digital assets. Investors can choose an instrument focused on a single cryptocurrency or gain exposure to several segments of the market at once.
For example, thematic products may focus on the largest and most liquid cryptocurrencies or on blockchain platforms that support smart contracts.
This format resembles a ready-made cryptocurrency portfolio: investors do not need to select individual coins themselves or regularly adjust their allocations.
Who are crypto ETNs suitable for?
Crypto ETNs can be an option for investors interested in digital assets but who prefer to stay within the traditional financial system. They are particularly convenient for those who:
- already use a brokerage account;
- do not want to manage cryptocurrency custody themselves;
- want to add Bitcoin or Ethereum to a traditional investment portfolio;
- prefer regulated exchange infrastructure.
However, convenience does not eliminate the need to study the specific product.
Before purchasing a crypto ETN, investors should pay attention to the issuer, the collateral structure, the custodian, fees, liquidity, and legal terms.
Ultimately, crypto ETNs solve one fairly simple problem: they let investors gain exposure to digital assets in a way that feels familiar to the traditional stock market.
They are, in a sense, a bridge between two financial worlds — traditional finance and cryptocurrency. And as these worlds move closer together, more instruments of this kind are appearing on the market.