REX-Osprey's XRP ETF routes over 40% of assets through another XRP ETP, creating layered fees and trading frictions that can cause the ETF's performance to drift from the underlying XRP token's price for U.S. investors
REX-Osprey's XRP ETF is drawing attention for its complex structure, which could lead to returns that do not closely track the price of XRP itself. As of August 24, the fund held 40.25% of its assets-about $22.87 million out of a $56.68 million portfolio-in the CoinShares Physical XRP ETP, a Jersey-domiciled exchange-traded product listed on European markets. The remaining 59.74% was reported as direct XRP exposure, though the fund's documentation clarifies that this exposure may be held through a Cayman Islands subsidiary rather than direct token ownership.
Layered Fees and Trading Costs
This dual-layer structure means investors in the U.S.-listed ETF are exposed to two sets of fees: REX-Osprey's own 0.75% annual operating expense ratio, and CoinShares' 1.50% annual fee for its XRP ETP. Based on the August 24 allocation, the CoinShares sleeve alone could add an estimated 0.60 percentage points of annual drag to the ETF's performance, before accounting for changes in allocation or market conditions. These costs are not fixed, as the ETF's holdings can shift daily and the accounting treatment of acquired-vehicle fees may vary.
Tracking Differences and Market Frictions
Beyond fees, the ETF's reliance on another listed product introduces additional tracking risks. When REX-Osprey rebalances, creates, or redeems shares, it may need to trade the CoinShares ETP on European exchanges, which can have different trading hours, liquidity profiles, and bid-ask spreads compared to U.S. markets. These frictions can further widen the gap between the ETF's net asset value and the spot price of XRP, especially during periods of volatility or thin liquidity. The extra layer also adds complexity to custody and legal arrangements, as the ETF's XRP exposure is partly mediated through a debt security rather than direct token holdings.
Mandate and Regulatory Disclosures
The ETF's structure is consistent with its June 30 prospectus, which requires at least 80% of assets in XRP or XRP-linked instruments and at least 40% in securities such as ETFs or non-U.S. exchange-traded products. CoinShares states its ETP is 100% physically backed by XRP, but this does not eliminate the legal and operational differences between holding XRP directly and gaining exposure through an ETP. For investors, the practical effect is that the ETF's returns may diverge from XRP's price due to the combined impact of layered fees, trading costs, and structural complexity.
These challenges echo broader concerns about how ETF structures and trading frictions can affect performance, as seen in other crypto-linked funds. For example, tepid inflows and market structure issues have raised questions about the ability of some Bitcoin ETFs to deliver on their long-term growth scenarios, as discussed in EgonCoin's analysis of ETF inflows and market headwinds for Bitcoin.
On August 24, REX-Osprey's XRP ETF reported 4.7 million shares outstanding, a net asset value of $12.09 per share, and a closing price of $12.06. At the same time, XRP ranked #5 by market capitalization, with a circulating supply of 62.74 billion tokens, a market cap of $86.95 billion, and 24-hour trading volume of $4.36 billion, according to CoinMarketCap. Over the previous 24 hours, XRP's price declined 5.76%, while trading volume fell 7.69%.
For investors considering crypto ETFs, understanding the underlying structure, fee layers, and trading mechanics is critical. While products like REX-Osprey's XRP ETF offer regulated market access and simplified exposure, they may not deliver returns that precisely match the underlying token, especially when exposure is routed through multiple listed vehicles. These differences can become more pronounced during periods of market stress, low liquidity, or rapid price movement, underscoring the importance of reading fund disclosures and understanding how ETF mechanics interact with the unique features of crypto markets.
