European crypto exchange-traded products (ETPs) have experienced a significant influx of investments in the second half of 2024, showcasing the rising confidence in Bitcoin and other digital assets among the region’s retail investors.

BeInCrypto spoke with Jellyverse Co-Founder Ben Rauch and Blocksquare CEO Denis Petrovcic to understand whether this increased demand for ETPs is here to stay or if it’s a temporary response to favorable market conditions.

Rising ETP Popularity in Europe

As crypto adoption and popularity continue to rise globally, ETPs such as exchange-traded funds (ETFs) and exchange-traded notes (ETNs) have emerged as major investment vehicles for European investors seeking exposure to this diverse asset class.

The European ETF industry, in particular, saw tremendous growth in 2024. The industry experienced an estimated net inflow records of €167.2 billion by the end of the third quarter, according to data from Lipper Alpha. This volume continues to reach unprecedented levels today.

“Over the last 12 months, investor sentiment has shifted significantly toward mainstream adoption. Bitcoin is no longer viewed as a risky or ‘shady’ investment for only criminals or tech enthusiasts. Instead, we see growing interest from investors worldwide, and this trend is likely to accelerate even further in 2025,” Rauch told BeInCrypto. 

ETPs are publicly traded securities that offer investors a convenient and cost-effective way to expand their portfolios.  Crypto ETPs attract many investors because they allow them to interact with crypto assets without having direct ownership over them.

“Crypto ETPs provide a seamless and regulated pathway to gain exposure to digital assets without the complexities of custody, security, and technical management. They fit easily within traditional portfolio structures, offering convenience and compliance for institutional investors,” said Petrovcic. 

They also bridge the gap between traditional and decentralized finance.

ETPs as a Means of Diversifying Investor Portfolios

Traditional investors consider Bitcoin ETPs an entry point to the broader digital asset market. 

“They are easily accessible to institutional investors, and some institutions are already expressing interest in allocating a portion of their treasury to crypto,” added Rauch.

High-profile firms like Microstrategy, Marathon Digital, Tesla, and Block already hold Bitcoin in their treasuries. 

MicroStrategy, for example, currently owns over 2% of Bitcoin’s supply, using debt and equity to amass 423,650 BTC worth $41.5 billion. By making the cryptocurrency the primary reserve asset in its treasury, MicroStrategy has cemented Bitcoin’s place in corporate finance.

Also, this aggressive Bitcoin accumulation strategy has paid off financially for the company. In the past year, MSTR’s stock price has surged over 480%. The stock was also added to the illustrious Nasdaq-100 index in December. As a result, several other crypto companies have been trying to follow in MicroStrategy’s footsteps.

On December 13, Riot Platforms, a leading Bitcoin mining and digital infrastructure company, acquired 5,117 BTC for $510 million, expanding its total holdings to 16,728 BTC.

Only two days before, Marathon Digital Holdings spent $1.1 billion to purchase 11,774 Bitcoin. It now holds 40,435 Bitcoin, valued at $3.9 billion.

Blockstream, a leading company in blockchain technology, has also been steadily accumulating Bitcoin and runs a Bitcoin treasury.

Exposure to Cryptocurrencies Beyond Bitcoin

Interactions with Bitcoin ETPs inevitably introduce investors to other types of cryptocurrencies.

“ETP providers are expanding their offerings to include multi-asset products, integrating real-world assets alongside cryptocurrencies. Innovations in custodial technologies and staking mechanisms are also making these products more appealing and secure,” said Petrovcic.

According to Rauch, other crypto assets aside from Bitcoin will soon drive ETP adoption in Europe. 

“Although Bitcoin remains the primary driver, I expect other crypto projects to benefit significantly as well—especially those recognized by governments or major industry players for their smart contract capabilities. If these projects are chosen for large-scale adoption, they could see substantial growth,” he said.

Industry players pay more attention to other tokenized assets through this generalized exposure. 

“Bitcoin’s 2024 rally has clearly sparked renewed interest in crypto-related investment vehicles. Institutional portfolios are increasingly integrating tokenized assets alongside cryptocurrencies, motivated by the need for diversification and the efficiency offered by tokenization. Real-world assets like tokenized real estate are becoming key complementary options, appealing to those seeking both growth and stability in their investments,” Petrovcic told BeInCrypto.

Petrovcic believes these tokenized assets are the real drivers behind ETP growth across Europe.

“The surge in European crypto ETP inflows highlights growing confidence in digital assets and the infrastructure supporting them. Personally, I believe it reflects a broader trend of investors recognizing the value of tokenization, not just for cryptocurrencies but also for tangible RWA assets, as part of a diversified investment strategy,” he added.

The growing interest in tokenized assets in European crypto ETP inflows reflects a broader shift towards diversified investment strategies.

Europe’s Unified Approach to Crypto Regulation

Regarding regulatory clarity, ETPs have seen more success in Europe than other regions.

Europe emerged as a leader in the crypto ETP market, beginning with the launch of the world’s first Bitcoin ETP by XBT Provider on Nasdaq Stockholm in 2015. This early entry emphasized the need for transparency and compliance, paving the way for a regulated bridge between traditional finance and the crypto market.

Listing crypto ETPs on major European exchanges like Deutsche Börse Xetra, SIX Swiss Exchange, and Euronext provides investors with secure and streamlined access to the cryptocurrency market, creating trust and facilitating broader adoption.

On December 30, the European Union approved the Markets in Crypto-Assets (MiCA) regulation, establishing uniform standards across EU member states. This standardized approach enhanced consumer protection by ensuring that all crypto asset issuers and service providers adhere to the same rules and regulations.

The MiCA approval consequently offers more regulatory certainty for ETP issuers and investors.

“Europe has made significant strides in clarifying regulations for crypto-assets, offering a higher degree of certainty for ETP issuers and investors. By applying these rules throughout the EU, MiCA creates a more predictable environment for both issuers and investors,” said Rauch.

As a result, Europe represents a key market for crypto ETFs, with a total asset size of $3.67 billion and representing 8.8% of the global crypto ETF market, according to CoinGecko research.

Since MiCA’s implementation, several crypto companies have also started to secure operating licenses across Europe. 

Balancing Regulation With Innovation

Though the European crypto community celebrated the approval of the MiCA framework, wariness exists over the risks with excessive investor protection. 

While the focus on transparency and investor protection is essential for the long-term growth and sustainability of the crypto ETP market, it can also have unintended consequences, potentially slowing down the pace of innovation within this sector, according to Rauch. 

Striking a balance between regulatory thoroughness and innovation should be at the heart of ETP-related legislation.

“There’s always a risk that excessive regulation could stifle innovation. Legislatures must walk a fine line between protecting investors and keeping the industry competitive—especially one that’s known for relocating if conditions become unfavorable. I believe that establishing fundamental standards and rules for custody, risk disclosure, and business operations should suffice initially, allowing businesses to thrive without too many obstacles. Since crypto is a global market powered by highly skilled participants, making it overly burdensome will simply drive them to other jurisdictions,” Rauch said.

To avoid a situation where the balance is tipped,  regulators and industry players need streamlined communication between each other. 

“I believe that a collaborative approach between regulators and the industry can strike the right balance. Regulators should focus on fostering transparency and promoting education, alongside clear guidelines for issuers. This approach would ensure that innovation in ETPs continues while safeguarding retail investors from unnecessary risks,” added Petrovcic.

Finding the right equilibrium will be crucial for the continued growth of the European crypto ETP market.

ETPs and Associated Risks

Despite Europe’s proactive approach to crypto regulations to safeguard investor interests, the crypto market’s inherent volatility exposes ETP investors to price instability. 

“Since crypto ETPs are highly volatile assets, they aren’t suitable for every investor and often require an adjustment period to handle sharp price swings. This volatility can lead to impulsive investment decisions and potentially large losses. Although the regulatory framework is relatively strong, new market entrants may still fail or make poor decisions, putting customer funds at risk,” Rauch told BeInCrypto. 

To that, Petrovcic added:

“Misunderstanding the nature of these products can lead to overexposure, especially during market downturns.”

He also argues that certain risk management practices need to be implemented to mitigate the negative impact of market instability and ensure the stability of ETPs during periods of volatility.

“Ensuring liquidity and effective risk management strategies during periods of volatility is critical to maintaining investor confidence in these products. Stability measures often include robust custodial solutions, transparent pricing mechanisms, and regulatory oversight. This approach would ensure that innovation in ETPs continues while safeguarding retail investors from unnecessary risks,” he said. 

Alleviating these risks will further drive investor confidence and a broader ETP adoption.

How the United States Might Shape Europe’s ETP Market

Now that many market participants expect the incoming Trump administration to create a more crypto-friendly environment in the United States, this could motivate Europe to maintain its position as a leading player in ETPs. 

“Historically, Europe has moved more slowly when embracing new innovations. If the US implements supportive crypto policies, we could see a major shift in market focus to the US, particularly for products like ETPs and ETFs, which have already played a key role in changing overall investor sentiment,” Rauch said. 

In the past few years, the US has struggled to provide a clear regulatory framework for the cryptocurrency industry. 

In January 2024, ‭the‬‭ SEC‬‭ approved 11 spot Bitcoin ETFs for the first time in the US. Four months later, the SEC also greenlit spot‬‭ Ethereum ETFs.

However, the approval came after several years of battle before the SEC recognized the two cryptocurrencies as non-securities.  Now, within a year, several other crypto-based ETFs, such as XRP and Solana, are pending approval from the regulator.

If the SEC under Trump-appointed Chair Paul Atkins proves to be more proactive, this may also incentivize Europe to review its regulatory approach to ETPs. 

“Pro-crypto policies in the US could intensify competition, prompting Europe to refine its regulatory framework to maintain leadership. This would benefit the global market for tokenized assets, including cryptocurrencies and real-world assets, driving innovation and adoption on both sides of the Atlantic,” said Petrovcic. 

As ETPs gain momentum, striking the right balance between innovation and investor protection will become a pressing issue for nations and institutions.