Cryptocurrency ETFs: The Evolution to Active Strategies and the Future of Investment

The post-approval era of Bitcoin ETFs

The approval of the first Bitcoin ETFs in the United States in January 2024 marked a turning point for the cryptocurrency market, bringing institutional legitimacy and facilitated access to millions of investors. However, this was just the first phase. Now, the industry is in a new chapter, focused on product sophistication. As highlighted by Duncan Moir, president of 21Shares, investor demand is changing, driving exchange-traded funds (ETFs and ETPs) beyond simple passive exposure to the price of an asset. This movement signals market maturity and opens a range of new opportunities, especially relevant to the Brazilian scenario, where structured cryptocurrency products are still in the early stages.

What are cryptocurrency ETFs and ETPs?

ETFs (Exchange-Traded Funds) and ETPs (Exchange-Traded Products) are financial instruments that allow you to invest in a basket of assets without having to buy them directly. In the crypto context, they track the price of a digital currency, such as Bitcoin or Ethereum, and are traded on traditional stock exchanges. This eliminates the need for the investor to deal with digital wallets, private keys or specialized brokers, offering a crucial bridge between the traditional financial world and the universe of cryptocurrencies.

The Transition to Active Crypto Management

The first approved ETFs were predominantlypassiveThe next wave, as anticipated by 21Shares and other market players, will be dominated by strategies.activatedBut what does this mean in practice?

Passive vs. Active Management

A passive fund follows an index. In the case of Bitcoin, it buys andins the cryptocurrency, reflecting its market price. An active fund already has a manager or a team that makes decisions to try to outperform the performance of the reference market. In the crypto universe, this can involve:

• The dynamicallocation:Adjust the exposure between Bitcoin, Ethereum and other cryptocurrencies (altcoins) based on market analysis.
• Strategy of income (Yield)Using mechanisms such asStaking(proof of participation) or loans in DeFi protocols to generate passive income on the assets held in the fund.
• Protection against volatility:Derivatives or derivative techniqueshedgingSmooth the highs and lows of the market.
• Access to specific areas:Create ETFs focused on niches such as DeFi (Decentralized Finance), Web3, NFTs or blockchain infrastructure.

The recent launch of the loan protocolFiraWith $450 million in initial deposits and a focus on fixed rates, it illustrates the demand for more predictable and sophisticated DeFi products, which can be the basis for these new investment vehicles.

Impact and Opportunities for Brazilian Investors

Although Brazil has a vibrant crypto market, access to regulated and diversified products is still limited compared to the US and Europe.

Potential Benefits

• Diversification and professionalism:Active strategies managed by experts can offer a less volatile and more structured form of exposure to the crypto market, attracting institutional and conservative investors.
• Tax and operational simplification:Investing via ETFs on a local exchange (if and when available) simplifies tax declaration (come-quota, IR) and custody, compared to direct purchase on international exchanges.
• Exposure to complex strategies:Investors can use strategiesStakingor DeFi that, individually, would require advanced technical knowledge and assume operational risks (such as smart contracts).

Challenges and Considerations

• The administrative fees:Active funds charge higher rates than liabilities, which can corrode returns in the long run.
• Regulations in Brazil:CVM has not yet approved cryptocurrency ETFs in the country. The most viable pathway currently is direct investment in ETFs listed abroad, subject to funds transfer rules and specific taxation.
• Timing of the market:The performance of an active manager does not always exceed the index.In a highly efficient and volatile market like cryptocurrency, this premise will be tested.

The Regulatory Scene and the Future

Participation of figures like the American SenatorCynthia LummisIn events like Bitcoin 2026 reinforces the growing intersection between cryptocurrencies and politics. Lummis is co-author of a comprehensive bill to regulate the industry in the U.S. A clear regulatory framework in major markets is a prerequisite for more financial institutions to develop and offer products such as crypto asset ETFs globally.

In Brazil, similar discussions are advancing, and the maturity of products abroad serves as a thermometer and a model for future local adaptations. The trend is that over time, the offer of cryptocurrency products to the final investor becomes as diverse and segmented as the offer of stock funds or multi-markets today.

The Conclusion

The evolution of cryptocurrency ETFs from passive products to active management vehicles represents the natural maturity of a market that seeks to meet a wider range of risk profiles and investment goals. For Brazil, tracking and understanding this trend is crucial. While local products may take a while, an informed investor can already prepare, understanding the nuances between different strategies and assessing how they can fit into a diversified portfolio. The future of cryptocurrency investment will not only be about "buy Bitcoin", but about how to access blockchain innovation in an efficient, regulated and tailored way to each financial goal.