5 Things You Need To Know About Spot Ethereum ETFs

Updated: 23 July 2024

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The US Securities and Exchange Commission (SEC) approved spot Ethereum ETF (exchange-traded fund) products on July 22 and they’re set to launch today.

The approval is seen as another landmark breakthrough for crypto that will lead to greater mainstream adoption of digital assets.

Some analysts, including Bloomberg’s Eric Balchunas, say that ETH ETF approvals could open the floodgates for more spot crypto ETFs in the US, with Solana ETFs widely considered to be next in line.

As the crypto community speculates on how these products will perform, here are five key things you need to know about the latest crypto ETFs:

What Is A Spot Ether ETF?

A spot ETH ETF is an investment fund tracking Ether’s spot price and is listed on traditional stock exchanges.

The recently approved Ethereum ETFs will be listed on the Chicago Board Options Exchange (CBOE), Nasdaq, and the New York Stock Exchange (NYSE).

Spot ETH ETFs make it easier for investors and institutions to access Ethereum within a traditional financial setting. Fund managers can allocate part of their portfolio to Ether ETFs rather than investing in Ethereum directly.

In the first quarter of this year, several ”big fish institutions,” including the State of Wisconsin and Millennium Management, revealed investments in spot Bitcoin ETFs.

The hope is that mega fund managers like them will soon also be piling into Ether ETFs.

Who Are Issuing Spot Ether ETFs?

Eight Ether ETFs are expected to start trading on Tuesday. The issuers include Wall Street giants BlackRock, Fidelity, Franklin Templeton, and VanEck.

Crypto-native firms such as ARK Invest & 21Shares, Grayscale, Bitwise, and Invesco Galaxy are also among the issuers.

The majority of the Ethereum ETFs use Coinbase as a custodian. VanEck is also tapping the Gemini exchange for clearing infrastructure, while Fidelity will self-custody its Ether for the ETF.

Each of these ETFs is offered by a renowned fund manager using professional market makers to create and redeem shares.

How Much Are The Fees For Spot ETH ETFs?

The ETF issuers have set varying fees to gain a competitive edge in what is popularly known as the “fee war.”

BlackRock filed an amended S-1 registration statement on July 27, revealing a 0.25% fee for its ETF. However, the asset manager will impose a 0.12% fee for the first $2.5 billion in net assets.

Fidelity has also set its fee at 0.25% but will slash the fees entirely for at least 12 months. VanEck and Bitwise have set their fees at 0.20% but will also slash them initially.

The 21Shares Core Ethereum ETF has a 0.21% fee with zero fees for the first 12 months or until the fund hits $500 million in net assets.

Invesco Galaxy has set a 0.25% fee with no waiver period, while Franklin Templeton has the lowest fee at 0.19%.

The Grayscale Ethereum Trust (ETHE) has the highest fee at 2.50%, similar to its Bitcoin ETF. However, its smaller “mini trust ETF” has a lower fee of 0.25%.

Okay everyone. Here are the details for the #Ethereum ETFs that we expect to launch next week. We are only missing details for Proshares's ETF. 7 of the 10 funds have fee waivers. pic.twitter.com/5v3QnHOeub

— James Seyffart (@JSeyff) July 17, 2024

Is There Staking?

While spot Ether ETFs are not allow to offer staking right now, SEC Commissioner Hester Pierce has said that could be reconsidered.

NEW: SEC Commissioner Peirce tells me Ethereum ETFs being able to stake could be open to reconsideration

"I think certainly something like staking, or any feature of the product … those are always open for reconsideration as far as I'm concerned" pic.twitter.com/SFUTPcX80z

— Zack Guzmán (@zGuz) July 17, 2024

Earlier this year, issuers including BlackRock, Fidelity, and Franklin Templeton included staking in their ETF filings. But this was rejected by the SEC, which has previously classified staking as an unregulated activity that violates securities laws.

Last year, Kraken made a $30 million settlement with the SEC over its crypto staking-as-a-service program.

The SEC is also pursuing similar charges against Coinbase after suing the exchange in June last year.

What Are the Anticipated Inflows Into Spot Ether ETFs?

Spot Ether ETFs will attract $15 billion in new assets during the first 18 months, says Bitwise’s Chief Investment Officer Matt Hougan.

Hougan said in a research note that $11 billion would flow out of the Grayscale Ethereum Trust during the first few weeks, but new highs will be in by year’s end.

Hougan also anticipates that inflows to spot ETH ETFs will push the Ethereum prices to $5,000, up about 44% from the $3,463 it traded at as of 10:12 a.m. EST.

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