The US Securities and Exchange Commission (SEC) has approved the first spot Ethereum exchange-traded funds (ETFs). This follows the launch of Bitcoin ETFs earlier this year. The Financial Times reports that the approved Ethereum ETFs include the conversion of a $9.3 billion Grayscale Investments trust and new products from Bitcoin ETF giants BlackRock and Fidelity.
Trading is expected to commence as early as Tuesday, according to fund sponsors. The SEC has not commented on the approvals. Ethereum, the native cryptocurrency of the Ethereum blockchain, is the second-largest crypto token globally, with a market cap of approximately US$415 billion. This approval follows the launch of ether futures ETFs last year and further solidifies crypto’s presence in traditional US finance after January’s introduction of the first US spot Bitcoin ETFs.
“Traditional asset management can no longer ignore crypto as an asset class,” said Matt Hougan, chief investment officer at crypto fund sponsor Bitwise. He anticipates widespread adoption of this space.
Fees
Ethereum ETF issuers are competing for investor interest with closely matched fees. Most products have final expenses below 0.25 per cent, with at least five issuers planning to waive fees initially, according to Bloomberg Intelligence data. However, Grayscale Investments stands out by maintaining a 2.5 per cent management fee for its large converted Ethereum ETF while offering a smaller version with the lowest post-waiver fee of 0.15 per cent.
In January, Grayscale kept its Bitcoin ETF management fee at 1.5 per cent, generating $160 million in fee revenue in 2024, making it the third-highest revenue-generating ETF in the US.
Despite the enthusiasm, these Ethereum products are not expected to attract as many assets as the Bitcoin ETFs, which have seen over $17 billion in new investments over the past six months. Tim Ogilvie, global head of institutional at Kraken, expressed scepticism about Ethereum’s appeal compared to Bitcoin’s “digital gold” status. Hougan predicts that Ethereum ETFs will attract about $15 billion in their first 18 months, though he expects summer inflows to be somewhat unpredictable.
