A cryptocurrency exchange-traded fund (ETF) is a type of investment fund that tracks the price of one or more cryptocurrencies and is traded on traditional stock exchanges. Here's a brief overview of how crypto ETFs work:

1. Investment Structure: A crypto ETF pools investors' money to purchase cryptocurrencies or derivative products that track the price of cryptocurrencies. The ETF issues shares to investors, which represent their ownership in the fund.

2. Tracking Index or Benchmark: Most crypto ETFs aim to replicate the performance of a specific cryptocurrency index or benchmark, such as the price of Bitcoin or a basket of cryptocurrencies. The fund's performance closely mirrors that of the underlying index.

3. Market Trading: Crypto ETF shares are traded on traditional stock exchanges, allowing investors to buy and sell them through brokerage accounts during regular trading hours. This provides investors with easy access to cryptocurrency exposure without needing to directly purchase or store digital assets.

4. Regulatory Compliance: Crypto ETFs are subject to regulatory oversight by financial authorities in the jurisdictions where they operate. Regulatory requirements may vary depending on the country, and ETF providers must comply with securities laws and regulations applicable to investment funds.

5. Liquidity and Transparency: ETFs typically offer high liquidity, allowing investors to easily buy or sell shares on the stock exchange at market prices. Additionally, ETFs provide transparency into their holdings, with regular disclosures of their portfolio composition and net asset value (NAV).

Overall, crypto ETFs offer a convenient and regulated way for investors to gain exposure to the cryptocurrency market through traditional investment channels. However, investors should carefully consider factors such as regulatory risks, fees, and the fund's investment strategy before investing in a crypto ETF.