Ethereum ETF: How It May Work in 2024

An Exchange-Traded Fund (ETF) for Ethereum represents a financial vehicle that tracks the price of Ethereum, allowing investors to buy and sell shares on conventional stock exchanges. This regulated investment alternative facilitates participation in the cryptocurrency market without having to directly manage digital assets. By replicating Ethereum’s performance, ETFs offer exposure to its value without the complications associated with owning the cryptocurrency.

Operating within the regulatory framework of traditional financial markets, Ethereum ETFs provide investors with a safe and regulated channel to venture into cryptocurrency investments. This regulatory oversight increases investor confidence and ensures compliance with established financial standards.

In addition to accessibility, these funds offer benefits such as regulatory oversight, ease of trading, and the ability to diversify investment portfolios. By trading on major stock exchanges, Ethereum ETFs provide liquidity and simplicity for investors, even those new to cryptocurrency markets.

When will the ETF be approved?

According to Standard Chartered, it is likely that the U.S. Securities and Exchange Commission (SEC) will allow exchange-traded funds to hold the cryptocurrency Ethereum in May. The bank notes that May 23 is the deadline for the SEC to consider the VanEck and Ark 21Shares ETF applications, making them the first asset managers to reach the final deadline.

In a recent research report, Standard Chartered highlights that the SEC is likely to make a decision on the applications by the deadline, citing its approval of 10 bitcoin ETFs on January 10. Geoff Kendrick, Head of FX, West and Digital Assets Research at Standard Chartered, suggests that Ethereum shares key similarities with the legal and financial status of bitcoin, which could indicate a similar approval pattern.

Will Ethereum’s price rise after its approval?

According to Kendrick’s analysis at Standard Chartered, Ethereum’s price is expected to rise to $4,000 by the anticipated approval date of May 23. This forecast is based on assumptions such as market sentiment and the SEC’s approval of multiple ETF applications. Additionally, Ethereum is expected to avoid the same sell-off experienced by Bitcoin after its ETF approval, as the Ethereum fund holds a smaller portion of the total market compared to Bitcoin.

It also considers that, following the approval of the Ethereum ETF, the market may perceive a higher degree of legitimacy and confidence in the cryptocurrency. This could attract more institutional and retail investors to the Ethereum market, potentially driving its price upwards. Furthermore, increased demand for Ethereum as a result of ETF approval could lead to greater scarcity of the cryptocurrency in the markets, which would also contribute to its price increase. However, it is important to note that market forecasts are speculative and subject to a wide range of variables and market conditions.

List of ETFs:

There are several Ethereum ETFs available for investors looking to gain exposure to this cryptocurrency in a regulated and convenient manner. Some of these ETFs include:

-Ethereum Bitwise Strategy ETF (AETH)

-Bitcoin and Ether Bitwise Equal-Weight Strategy ETF (BTOP)

-ProShares Ether Strategy ETF (EETH)

-ProShares Bitcoin and Ether Equal Weight Strategy ETF (BETE)

-ProShares Bitcoin and Ether Market Cap Weight Strategy ETF (BETH)

-VanEck Ethereum Strategy ETF (EFUT)

Additionally, Grayscale Investments, Global X, and Ark Invest are also expected to launch their own Ethereum ETFs in the near future. These ETFs offer investors various strategies to gain exposure to Ethereum, from equal weighting between Bitcoin and Ether to market capitalization weighting.

Advantages of ETFs

Accessibility: They allow for easy trading of Ethereum through traditional brokerage accounts on stock exchanges. This means investors can buy and sell Ethereum in the same way they would with stocks or traditional funds, without the need to set up a digital wallet or deal with cryptocurrency exchanges.

Regulation: ETFs are subject to supervision and regulation within traditional financial markets. This provides investors with a level of security and regulatory protection that may be lacking in other cryptocurrency investment products. Regulatory oversight can help mitigate the risk of fraud and market manipulation.

Diversification: Including a cryptocurrency asset class like Ethereum in a diversified portfolio can help reduce risk by spreading capital across different types of assets. This can be especially beneficial for investors looking to diversify their investments beyond traditional stocks and bonds.

Simplicity: Ethereum ETFs offer exposure to Ethereum’s value without the need to directly own and secure actual Ethereum. This eliminates the complexity associated with managing cryptocurrencies, such as the need for secure storage and protection against digital theft. Investors can access Ethereum through a familiar and easy-to-understand investment structure.

Liquidity: ETFs offer high liquidity, meaning investors can buy and sell ETF shares easily on the secondary market. This provides flexibility and convenience to investors by allowing them to enter and exit their Ethereum positions quickly and efficiently, without having to wait for cryptocurrency exchanges to close.

The best ETFs:

CI Galaxy Ethereum (TSE: ETHX):

This ETF was one of the first available globally and claims to be the first to track Ethereum’s performance.

It offers a convenient way for investors to gain exposure to Ethereum’s price without directly owning the cryptocurrency.

The annual management fee of 0.4% is one of the lowest compared to other similar ETFs.

It provides liquidity and transparency by being listed on the Toronto Stock Exchange (TSE).

Evolve Ether ETF (TSE: ETHR):

Similar to the CI Galaxy Ethereum, the Evolve Ether ETF also tracks Ethereum’s price and offers an accessible way to invest in the cryptocurrency.

It uses a daily reference rate to determine its share price, allowing investors to speculate on daily price changes.

Like other cryptocurrency ETFs, it offers an option for investors wishing to participate in the cryptocurrency market without directly managing digital assets.

Purpose Ether ETF (TSE: ETHH):

This ETF also tracks Ethereum’s price and holds it in cold storage to ensure its security.

Although it has a slightly higher management fee compared to other Ethereum ETFs, around 1% annually, it offers investors an additional way to diversify their investment portfolio.

In addition to tracking Ethereum’s price, Purpose also offers other ETFs that may be of interest to investors wishing to explore other cryptocurrencies, such as Bitcoin.

Bitcoin ETF vs. Ethereum ETF

The differences between Ethereum ETFs and Bitcoin ETFs are evident and go beyond simply tracking the price of one or the other cryptocurrency. Although both types of ETFs provide an accessible way to invest in cryptocurrencies without having to directly own the digital assets, there are aspects that distinguish them.

In terms of reference asset, Ethereum ETFs are linked to the price of Ethereum (ETH), while Bitcoin ETFs track the price of Bitcoin (BTC). This reflects investor preferences and diversity in the cryptocurrency market, where Ethereum has stood out for its smart contract technology and focus on decentralizing applications.

Additionally, the timeline of their entry into the market is significant. Ethereum ETFs were launched later, with the first Ethereum ETF debuting on October 2, 2023, while the first Bitcoin ETF, BITO, made its entry on October 19, 2021. This difference in timing may influence the liquidity and adoption of these financial products.

In terms of costs, both types of cryptocurrency ETFs have expense ratios that tend to be relatively high, ranging between approximately 0.65% and 0.95%. However, it is important to note that these costs may vary depending on the ETF provider and other factors such as the fund’s structure and associated services.

Another relevant aspect is the underlying infrastructure used for price tracking. While some Bitcoin ETFs may be backed by Bitcoin futures, Ethereum ETFs may use Ethereum futures contracts or other structures to replicate the performance of the underlying asset. This difference in structure can influence the efficiency and correlation of the ETF with the digital asset’s price.

In summary, although Ethereum ETFs and Bitcoin ETFs share certain similarities in their goal of providing exposure to cryptocurrencies to traditional investors, differences in underlying assets, timelines, costs, and underlying structure can influence their performance and appeal to investors.