Crypto perpetual swaps and leveraged exchange-traded products (ETPs) can both offer traders amplified exposure to digital assets – long or short. But they work very differently. Here's how the two compare.
What are crypto perpetual swaps?
Crypto perpetual swaps (or "perps") are derivatives contracts with no expiry date. Traders use perps to take a position on the price of a digital asset – like bitcoin – without owning the digital asset. Perps can offer extreme leverage of 50x or more on some offshore crypto exchanges. That can significantly amplify both gains and losses.
Perp prices track the actual spot price through a "funding rate" mechanism. Assume bitcoin's spot price is $80,000, but bitcoin perps trade at $80,500 on a crypto exchange. That's usually because extra demand for long leverage bids the price of perps higher than the spot price.
But the extra demand also makes holding long contracts more expensive. Long traders pay short traders a small fee (usually every eight hours), which discourages new longs and rewards shorts. That can create selling pressure, which can push perp prices back down toward the spot price. And when perps trade below the spot price, the mechanism reverses.
Crypto exchanges can liquidate perpetual swap positions. If the price moves against your position and reaches your liquidation price, the exchange closes the trade automatically. Traders can lose their margin in full.
What is a leveraged crypto ETP?
A leveraged crypto ETP (exchange-traded product) trades on a stock exchange like a share. It aims to provide leveraged exposure to the daily price moves of a digital asset – without you owning that asset itself. Instead, the ETP uses derivatives to multiply the daily price move by the leverage factor. Leverage Shares offers 3x long and 3x short ETPs on Bitcoin and Ethereum.
Unlike perpetual swaps, leveraged ETPs are designed so you can't lose more than what you put in. There's no liquidation. If your trade goes badly, the most you could lose is the money you originally invested.
But leveraged ETPs reset their exposure every day. That means if you hold them for more than a day, your return won't be a clean 3x or -3x of bitcoin's overall move. It can drift higher or lower depending on the day-to-day price path. The longer you hold, the bigger the potential drift.
For a full breakdown of how the products work, see our Leveraged Crypto ETPs Explained guide.
Regulatory differences between perpetual swaps and leveraged crypto ETPs
Crypto perpetual swaps are derivatives. The UK's Financial Conduct Authority (FCA) banned the sale of crypto derivatives to retail in January 2021, and France's Autorité des marchés financiers (AMF) has similar retail restrictions. Across the wider EU, crypto exchanges often restrict retail access to perps through geo-blocks and identity checks.
Leveraged crypto ETPs also use derivatives, but they trade within a regulated exchange-traded product wrapper. The Leverage Shares Base Prospectus is approved by the Swedish Financial Supervisory Authority under the EU Prospectus Regulation. It’s also passported into Italy, Germany, France, Spain, the Netherlands, Austria, Denmark, Finland, Norway and Belgium. So a 3x leveraged ETP is legally available to retail investors in those countries, depending on broker coverage.
The ETPs are currently listed on the SIX Swiss Exchange and SeDeX in Italy.
Crypto perpetual swaps vs leveraged ETPs: side-by-side
The table below compares the two products across the features that affect traders.
Leverage Shares offers 3x long and 3x short Bitcoin and Ethereum ETPs. See our Leveraged Crypto ETPs Explained guide for more on how the products work. Capital at risk.
Key takeaways
Crypto perpetual swaps offer high leverage and 24/7 trading. But most European retail traders can't access them due to restrictions and exchange-level geo-blocks.
Leveraged crypto ETPs are regulated exchange-traded products that trade on traditional stock exchanges. They're designed so investors can’t lose more than the amount they invest.
Crypto perps use funding rates and can be liquidated. Leveraged crypto ETPs reset daily, which may cause returns to drift from a clean multiple if held for more than a day.
