ETF manager 21Shares to merge with crypto broker firm FalconX in undisclosed deal

FalconX acquires 21Shares to expand product suite

The deal, whose details remain undisclosed, will allow FalconX to expand its product line in the industry beyond market-making services and liquidity provision, into crypto exchange-traded funds (ETFs).

Executives of both firms said that the merger will focus on developing crypto funds based on derivatives and structured products.

21Shares is one of the most prominent providers of crypto Exchange Traded Products (ETPs), with over 50 listed offerings managing over $11 billion in assets.

Although the terms of the deal remain undisclosed, it was completed using a blend of cash and equity.

On the other hand, FalconX, the crypto trading broker co-founded by Raghu Yarlagadda in 2018, has facilitated over $2 trillion in cryptocurrency transactions for more than 2,000 institutional clients.

FalconX’s expansion into crypto ETFs follows key milestones in the regulatory landscape, including the passing of the GENIUS Act in the United States (US). The US Securities & Exchange Commission (SEC) and other agencies have promised to formulate a progressive regulatory framework that supports innovation while protecting the interests of stakeholders and customers.

Crypto ETPs are financial products that allow exposure to cryptocurrency prices by tracking spot and futures directly on stock exchanges. The approval of Bitcoin spot ETFs in January 2024 significantly changed the outlook of the cryptocurrency market, making Bitcoin attractive to institutional traders as a maturing asset.

Crypto ETF FAQs

What is an ETF?

An Exchange-Traded Fund (ETF) is an investment vehicle or an index that tracks the price of an underlying asset. ETFs can not only track a single asset, but a group of assets and sectors. For example, a Bitcoin ETF tracks Bitcoin’s price. ETF is a tool used by investors to gain exposure to a certain asset.

Is Bitcoin futures ETF approved?

Yes. The first Bitcoin futures ETF in the US was approved by the US Securities & Exchange Commission in October 2021. A total of seven Bitcoin futures ETFs have been approved, with more than 20 still waiting for the regulator’s permission. The SEC says that the cryptocurrency industry is new and subject to manipulation, which is why it has been delaying crypto-related futures ETFs for the last few years.

Is Bitcoin spot ETF approved?

Yes. The SEC approved in January 2024 the listing and trading of several Bitcoin spot Exchange-Traded Funds, opening the door to institutional capital and mainstream investors to trade the main crypto currency. The decision was hailed by the industry as a game changer.

Which are the pros and cons of crypto ETFs?

The main advantage of crypto ETFs is the possibility of gaining exposure to a cryptocurrency without ownership, reducing the risk and cost of holding the asset. Other pros are a lower learning curve and higher security for investors since ETFs take charge of securing the underlying asset holdings. As for the main drawbacks, the main one is that as an investor you can’t have direct ownership of the asset, or, as they say in crypto, “not your keys, not your coins.” Other disadvantages are higher costs associated with holding crypto since ETFs charge fees for active management. Finally, even though investing in ETFs reduces the risk of holding an asset, price swings in the underlying cryptocurrency are likely to be reflected in the investment vehicle too.

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