The U.S. Securities and Exchange Commission (SEC) is set to approve a number of new spot trading products. Ethereum Ethereum
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Tuesday ETFs. Up to 8 funds are expected. We are launching an exchange that will allow retail investors and institutions, particularly those that do not own digital assets, to purchase the second-largest cryptocurrency by market capitalization.
Ethereum is the most mature blockchain built specifically for decentralized applications. Launched in 2015, Ethereum has the most developers and is consistently ranked as one of the most active chains. Ethereum’s native token, Ether or ETH, has a market cap of $400 billion and is the only token, other than Bitcoin, to have a futures contract traded on the CME exchange.
The SEC’s approval of a spot ETH exchange-traded fund (ETF) is seen as a legitimizing force for cryptocurrencies, potentially boosting their prices. After a long period of regulatory pressure, spot Bitcoin ETFs launched in the US in January have been a breakout success. Eleven funds have so far reached a market cap of nearly $60 billion, and many market participants and watchers believe that ETH ETFs could attract similar interest from retail and institutional investors.
“I think these ETF products are a huge validation of the legitimacy of crypto as an asset class,” Kraken’s head of strategy Thomas Perfumo told The Block. “The same people who were calling crypto ‘rat poison’ five years ago are now building products around it. There’s real demand behind it. You can’t ignore it anymore.”
Experts like Matthew Sigel, head of digital asset research at VanEck, also believe that the approval of an ETH ETF could open the door to similar products for other cryptocurrencies. VanEck was the first company to file for an ETF tracking Solana, but most market commentators say it is unlikely to launch anytime soon.
What is an ETH ETF?
Spot ETH exchange-traded funds (ETFs) track the price of Ethereum’s native token.
ETFs are a relatively new type of investment product that first hit the market in the early 1990s. Since then, they have become one of the most popular financial products. Traded on exchanges such as the NYSE and Nasdaq, these funds give investors exposure to securities or commodities, and often have lower fees and expense ratios than buying individual stocks.
In other words, crypto ETFs are an easier way for retail investors to introduce assets like Ether and Bitcoin into their retirement accounts, and for institutions to build crypto trading strategies. This could drive demand for ETH, potentially driving up its price, as ETFs are a more familiar on-ramp for many than native crypto exchanges or P2P transfers.
How much ETH will be accumulated in the fund?
Estimates for ETH ETF inflows vary widely. Perfumo forecasts net inflows of $750 million to $1 billion per month in the first five to six months. That’s in line with Citigroup’s forecast of $4.7 billion to $5.4 billion in the first six months of trading. However, the bank said ETH ETFs would only see 30% to 35% of Bitcoin spot ETF inflows.
For reference, Bitcoin is up about 50% since its spot price. 
Bitcoin
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The fund launched and hit an all-time high of over $70,000, with net inflows of over $12 billion across spot Bitcoin funds.
Bitwise, one of the companies launching an ETH ETF, is even more bullish, predicting $15 billion in ETH ETF inflows by May 2025. Traders have bought over $20 million worth of ETH call options in anticipation that this money will push the price of ETH to new highs. It is worth noting that Bitcoin immediately fell as soon as the spot BTC ETF was launched.
“Our $22,000 price target would give ETH a market cap of $2.5 trillion, roughly the size of Google today,” Sigel said in an email.
Who Buys Cryptocurrency ETFs?
Exchange-traded funds are popular financial products across the board. While many institutional investors, such as Steven Cohen’s Point72 Asset Management, Paul Singer’s Elliott Investment Management, and Israel Englander’s Millennium Management, have bought spot Bitcoin ETFs, the market has been dominated by retail traders.
As of May, when financial firms filed their 13F forms, Bitwise found that about 1,000 firms with more than $100 million in assets had purchased bitcoin ETFs. Yale and Princeton also reported holding bitcoin ETFs as part of their endowments.
That’s a lot of companies. Bloomberg’s James Seifert says Bitcoin funds have been more popular than expected. But according to Bitwise, retail investors have created 80% of assets under management.
Ethereum appeals to a different type of investor than Bitcoin, which is sometimes referred to as “hard money” or an inflation hedge. ETH also has lower brand awareness. Either way, an ETH fund is likely to attract more investors than it does today, boosting liquidity and increasing network adoption.
Where to launch ETH ETFs?
Eight companies are expected to receive SEC approval Tuesday or later, after the SEC approves their S-1 filings that disclose relevant information about how the funds are structured. They include ARK & 21 Shares, BlackRock, Fidelity, Franklin Templeton, Grayscale, Hashdex, Invesco, and VanEck, all of which also have spot bitcoin ETF products.
At least four of those firms use Coinbase as a custodian. VanEck uses Gemini as its clearing infrastructure, i.e. where orders are matched, and as a custodian, while Fidelity, which has deep experience in the Bitcoin market, holds its own ether.
The fund is expected to be listed on NASDAQ, Cbose BZX Fund and NYSE Arca.
What is the ETH ETF ‘fee war’?
Similar to how competing issuers have been lowering the management fees of Bitcoin funds, potential issuers appear to be engaging in a fee war. According to current S-1 filings, Franklin Templeton charges a management fee of 0.19%, VanEck 0.20%, 21Shares 0.21%, and Invesco 0.25%.
Grayscale is again charging the highest fees (1% for the spot Bitcoin ETF), charging 2.5% for its flagship product ETHE, but its smaller “mini-funds” charge the lowest fees at 0.15%, similar to the Bitcoin mini-fund.
BlackRock’s iShares fund launched with a 0.25% expense ratio, but plans to lower it to 0.12% once assets reach $2.5 billion. Bitwise is promising not to charge fees for six months until it reaches $500 million.
Is there staking?
Ethereum is secured by a process called staking, which rewards those willing to lock up the ETH needed to validate transactions. This is currently estimated to be 3.2% annual interest rate. Staking can be done individually (i.e. solo staking requiring 32 ETH) or through a third party such as a liquid staking protocol or exchange.
While many companies initially proposed staking ETH in a fund to generate income and reward buyers, the SEC raised concerns about this practice. As part of the approval process, companies including Ark, Fidelity, and Grayscale Removed staking component It recovered some of its funds, which would have helped differentiate it from other Bitcoin ETFs.
The SEC has found in several enforcement actions that staking violates securities laws. For example, the SEC I sued Coinbase filed a lawsuit in June 2023 over its staking service offering. SEC Chairman Gary Gensler has implied that ETH itself is a security, despite the CFTC approving ETH futures contracts, making it a commodity.
However, SEC Commissioner Hester Pierce said staking may not be permanently out of the equation. VanEck, for example, stakes most of the ETH in its European exchange-traded funds without issue, Sigel said. He added that it may require a change in administration to get approval.
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