Institutions pay 6 times more for crypto ETPs than third-party custodians

• Institutional investors considering bitcoin exposure should consider the cost of staying put. Crypto exchange-traded products (ETPs) are four to six times more expensive than custodial services, according to Finoa, a German crypto custody business
• A survey of 14 institutional-grade crypto custody providers revealed an average charge of 0.38 percent on a $23.5 million portfolio, including Coinbase, Gemini, BitGo, and Anchorage
• Finoa has non-disclosure agreements with three or four big financial institutions, according to Smith, and the sentiment is shifting toward direct crypto exposure, given the prospect of using such assets in decentralized financing (DeFi), for example

Institutional investors considering bitcoin exposure should consider the cost of staying put. Crypto exchange-traded products (ETPs) are four to six times more expensive than custodial services, according to Finoa, a German crypto custody business. Finoa discovered that single-asset ETPs charged an average (mean) cost of 1.8 percent, while multi-asset ETPs charged a price of 2.3 percent. According to Finoa, a single asset crypto ETP is 4.6 times more expensive than using a custodian, while a multi-asset ETP is 6 times more expensive. Crypto ETPs allow investors to profit from the underlying assets’ appreciation without having to deal with the cryptocurrency.

A survey of 14 institutional-grade crypto custody providers revealed an average charge of 0.38 percent on a $23.5 million portfolio, including Coinbase, Gemini, BitGo, and Anchorage. They looked at the pricing of all ETPs available and compared them to the prices of the world’s biggest custodians. And there’s this huge pricing disparity, Marius Smith, Finoa’s head of business development, explained. It’s a cultural desire, not a financial one. Many institutional investors are accustomed to interacting with the same systems, asset managers, and service providers. Grayscale, 21Shares, WisdomTree, VanEck, ETC Group, Iconic Holding, Evolve ETFs, CoinShares, Purpose Investments, CI Global Asset Management, Bitwise, 3iQ, First Block Capital, Valour, and Leonteq were among the 53 single-asset ETPs studied. There were also 13 multi-asset ETPs from Grayscale, 21Shares, FiCAS, Iconic Holdings, Bitwise, and 3iQ. 

Finoa has non-disclosure agreements with three or four big financial institutions, according to Smith, and the sentiment is shifting toward direct crypto exposure, given the prospect of using such assets in decentralized financing (DeFi), for example. In an interview, Smith said, they are clearly witnessing the rise of more index funds with various assets and so on, but none of them generate any significant DeFi action. An institution might acquire a stablecoin and start earning income right now, or they could learn about the proof-of-stake system. You may put those assets to work with the help of a custodian.