US Investment Firms Move Into Ethereum ETFs

In a significant development for the digital assets market, investment firms ProShares, VanEck, and Bitwise have recently introduced futures-based Exchange-Traded Funds (ETFs) tied to the value of ether, the world's second-largest cryptocurrency.

This follows the debut of the first US-listed bitcoin futures ETF in October 2021 and represents a noteworthy step forward in providing mainstream investors with regulated exposure to the expanding world of crypto assets.

Ether, the underlying token of the Ethereum network, is unique among cryptocurrencies as its value is directly influenced by the use of the Ethereum blockchain. When people utilise applications built on Ethereum, they must pay fees using the ether token, which is returned to ether investors, resembling stock buybacks and dividends, providing a basis for valuations.

ProShares, a renowned advisory firm, has introduced the ProShares Ether Strategy ETF (EETH US) on NYSE Arca, with an expense ratio of 0.95%. Additionally, ProShares has launched two ETFs designed to offer a blended return of bitcoin and ether: the ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE US) and the ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (BETH US), both priced at 0.95%.

VanEck's ETF, the VanEck Ethereum Strategy ETF (EFUT US), is actively managed and structured as a C-Corp. Managed by Greg Krenzer, a veteran in the asset trading space, EFUT is listed on Cboe BZX Exchange and boasts the lowest expense ratio among its counterparts at 0.66%.

Bitwise's contribution is the Bitwise Ethereum Strategy ETF (AETH US), listed on NYSE Arca with an expense ratio of 0.85%. Bitwise has also introduced the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP), which, like VanEck's BETE, rebalances to an equal allocation between bitcoin and ether futures on a monthly basis, with an expense ratio of 0.85%.

ProShares Advisors, the firm behind these ETFs, has made significant strides in expanding the crypto ETF market. Simeon Hyman, ProShares’ global investment strategist, emphasised the importance of having a regulated futures market in an ETF, stating that it resolves many challenges as the spot market matures. ProShares manages the Bitcoin Strategy ETF (BITO), the largest bitcoin futures ETF in the market, with over 37% gains year to date.

The US Securities and Exchange Commission (SEC) is currently reviewing the potential approval of a spot bitcoin ETF. This comes after a judge ruled against the SEC's argument to prevent the conversion of a Grayscale Bitcoin Trust (GBTC) into an ETF. ProShares remains optimistic about the future of crypto ETFs, stating, “We have a full suite of crypto solutions… the largest crypto ETF provider.”

In a broader context, the entrance of Ether into the ETF market is noteworthy, reflecting the industry's evolution. The ETF landscape is continually expanding, with Europe recently witnessing the launch of its first spot Bitcoin ETF by Jacobi Asset Management. The EU's spot Bitcoin ETF went live after a one-year delay, marking a significant development in the growing acceptance of crypto ETFs globally.

As traditional players enter the ETF market, there is increased anticipation regarding the SEC's decisions on various ETF applications, highlighting the regulatory landscape's importance in shaping the future of crypto investment products.