For many traditional investors, the technical challenges and security risks associated with directly holding Ether make them intimidated by entering this market. In response to these issues, financial markets have launched a series of Ethereum ETFs that allow investors to participate in this potential market without directly purchasing or managing Ethereum.
Crypto City will delve into the various types of Ethereum ETF products, how they operate and their investment characteristics, and compare the differences between Ethereum ETFs and direct purchases of Ethereum to help investors better understand how to choose the investment tool that suits them. Whether you are new to cryptocurrency or a veteran, this article will provide you with valuable reference information to help you make an informed choice when investing in Ethereum ETFs.
What is an Ethereum ETF?
Ethereum ETF (English: Ethereum ETF) or Ether ETF (Ether ETF) is an ETF that tracks the market trend of "Ethereum" or "Ethereum", allowing investors to trade without directly holding Ethereum. Able to participate in the price fluctuations of Ethereum through traditional financial markets. Blockchain Magazine, a media focusing on the development of blockchain and cryptocurrency, pointed out that the Ethereum ETF not only lowers the technical threshold for investing in cryptocurrency, but also improves the convenience for traditional investors to participate in the cryptocurrency market.
In order to facilitate readers' understanding, Crypto City will use "Ethereum ETF" as the main article discussion. If you still don’t understand the relationship between Ethereum and Ethereum, you can read our Ethereum Lazy Pack first.
Further reading:
What is Ethereum and its operation guide, understand Ethereum at once
In 2024, the U.S. Securities and Exchange Commission (SEC) approved the first spot Ethereum ETFs, which is an important milestone for cryptocurrencies to enter the mainstream financial market. Major asset management companies such as BlackRock, 21Shares, VanEck, Fidelity, etc. have also begun to launch Ethereum-related ETF products.
Techopedia, a technology and financial knowledge platform, believes that with the launch of the Ethereum ETF, the market demand for Ethereum will further increase, further promoting its development in areas such as blockchain, decentralized finance (DeFi), and NFT.
4 major investment features of Ethereum ETFs
Since the Ethereum ETF will fluctuate with the development of Ethereum and Ethereum, we can sort out the following 4 salient features of the Ethereum ETF:
Spot support
Convenient transactions
Compliance and security
Portfolio Diversification
Blockchain Magazine believes that Ethereum ETFs (especially spot ETFs) usually hold Ethereum directly, which allows its price to fluctuate in synchronization with changes in the Ethereum market price, providing investors with investment tools linked to the price of Ethereum. In addition, this type of ETF lowers the technical barriers to entry, and investors do not need to deal with the technical challenges of cryptocurrencies such as wallet management and private key storage, so traditional financial market participants can easily access Ethereum without worrying about technical details.
In terms of compliance and security, the Ethereum ETF is regulated by the U.S. Securities and Exchange Commission (SEC), which provides investors with greater transparency and compliance assurance for those who want to invest in cryptocurrencies in a legal, regulated environment. A reliable choice. Ease of trading is also a major advantage of Ethereum ETFs. Investors can buy and sell ETFs like stocks in a standard brokerage account, eliminating the need to rely on cryptocurrency exchanges and easily incorporating crypto assets into existing portfolios.
In addition, some Ethereum ETFs combine spot and futures contracts, providing more flexible investment options, allowing investors to benefit from spot prices while taking advantage of futures market fluctuations to diversify their investment portfolios.
These characteristics make the Ethereum ETF a convenient tool to attract traditional investors to participate in the crypto market, especially in the growing blockchain and decentralized finance (DeFi) fields.
As for, compared to buying Ethereum directly, what are the differences between investing in Ethereum ETFs? The encrypted city is organized into the following table to help you understand:
Compare items
Ethereum ETF
Buy Ethereum directly
Investment methods hold Ethereum indirectly, and directly hold Ethereum through ETF fund share participation. Management and security of the actual Ethereum are managed by the fund company. For higher security, you need to manage your own private keys and wallets. Security depends on personal measures. Convenience of transactions Sex can be bought and sold through a traditional stock brokerage account. It is easy to operate and requires the use of a cryptocurrency exchange for trading. The operation is more complex. Taxation and regulation. A government-regulated product. The tax treatment is similar to stocks. The tax treatment depends on local laws and may be complex. Risks Market risk Relatively controllable, no storage risk. Market risk is high. You also need to bear storage risks (such as hackers or loss of private keys). Management fees are required, usually charged at an annual fixed rate. No management fees, but there may be handling fees during transactions. Suitable for investors Suitable for traditional investors who want to simplify the cryptocurrency investment process Suitable for investors who are familiar with crypto technology and want full control over their assets
Chart source: (Crypto City) Chart The difference between Ethereum ETF and direct holding of Ethereum
What types of Ethereum ETFs are there?
Ethereum ETF can mainly be divided into two types: spot Ethereum ETF and futures Ethereum ETF according to whether it tracks the spot or futures market.
First of all, spot Ethereum ETF is an ETF that directly holds actual Ethereum. The price of this type of ETF is synchronized with the spot market price of Ethereum. Investors can directly be exposed to the price fluctuations of Ethereum by purchasing such ETFs. The investment tool that best reflects the real-time price changes in the Ethereum market.
Secondly, the Futures Ethereum ETF is an ETF based on Ethereum futures contracts, rather than holding actual Ethereum. Its price fluctuations mainly depend on the price trend of the futures market, so there may be a certain deviation from the spot market. This ETF is suitable for investors who have experience trading futures and want to profit from futures market volatility, albeit with a relatively higher risk.
feature
Spot Ethereum ETF
Futures Ethereum ETF
Asset support directly holds actual Ethereum based on futures contracts, without the need to hold actual Ethereum. The price fluctuates simultaneously with the spot market. Based on the futures market, the volatility is greater. The risk is highly correlated with the Ethereum market risk. The futures market risk is higher, involving contracts. Futures and swap risk fee structures Management fees are usually lower Management fees are usually higher and involve futures contract costs Suitable for investors Suitable for investors who hold Ethereum for a long time Suitable for investors who want to take advantage of market fluctuations for short-term operations
Chart source: (Crypto City) Chart Types of Ethereum ETFs
In addition, there will also be "combination Ethereum ETFs" that hold different proportions of spot and futures Ethereum, or focus on specific application scenarios of Ethereum technology, such as Web3, decentralized finance (DeFi) or NFT The market’s “thematic Ethereum ETF”.
These different types of Ethereum ETFs provide investors with a variety of choices. Whether they want to directly participate in the spot market, the futures market, or reduce risks through diversified investments, they can find a suitable product.
What factors affect the price of the Ethereum ETF?
The factors affecting the price of Ethereum ETF are diverse and complex, involving both the internal dynamics of the cryptocurrency market and the external economic environment and regulatory policies.
First of all, liquidity and trading volume directly affect the price stability of ETFs. Insufficient liquidity will aggravate price fluctuations. For example, the spot price of Ethereum is the main driver of ETF prices. When demand increases, ETF prices will rise accordingly, and vice versa. .
Therefore, whether investors are optimistic, whether there is negative news, market demand and investor sentiment such as Ethereum's technological progress, the Ethereum ETF will also play a key role.
In addition, macroeconomic factors such as regulatory policies, interest rate changes, and inflation also affect ETF prices. When the economy is unstable, investors may turn to more stable assets.
These factors work together to make Ethereum ETF price movements full of uncertainty. Investors should carefully evaluate various risks and make wise investment decisions.
What are the popular Ethereum ETFs in 2024? TOP10 Ethereum ETF List
There are currently several popular Ethereum ETFs on the market, which have attracted the attention of many traditional and institutional investors. CryptoCity has compiled a list of the Ethereum ETFs with the largest market capitalization currently (2024.10.02) as follows:
code name
ETF name
Total assets (USD million)
Year-to-date returns (YTD)
Average transaction volume
EETHProShares Ether Strategy ETF68.078.63%101,448.0BTFValkyrie Bitcoin and Ether Strategy ETF40.3027.59%33,562.0AETHBitwise Ethereum Strategy ETF9.115.95%6,915.0BETHProShares Bitcoin & Ether Market Cap Weight Strategy ETF8.7335.41%2,486.0BTOPBitwise Bitcoin and Ether Equal Weight Strategy ETF8.2724.67%1,400.0ARKZARK 21Shares Active Ethereum Futures Strategy ETF7.116.68%5,217.0BETEProShares Bitcoin & Ether Equal Weight Strategy ETF6.5126.26%2,557.0ARKYARK 21Shares Active Bitcoin Ethereum Strategy ETF3.8918.93%1,511.0BITWBitwise 10 Crypto Index Fund0.00N/AN/A
Data source: etfdb.com 2024.10.02
Among them, EETF, BTF and AETH are the three largest Ethereum ETFs by market capitalization. We will briefly introduce them below:
ProShares Ether Strategy ETF (EETH)
EETH is the first ETF in the United States to focus on Ethereum futures. It tracks the performance of Ethereum futures rather than directly holding Ethereum spot. Managed by ProShares, a leader in cryptocurrency ETF products, EETH launched in October 2023 and has rapidly grown AUM, providing investors with a familiar and regulated investment vehicle.
Valkyrie Bitcoin and Ether Strategy ETF (BTF)
BTF primarily invests in futures contracts for Bitcoin and Ethereum, with a balanced allocation to both cryptocurrencies. BTFs do not hold physical cryptocurrencies, but instead operate using the futures market, making them suitable for investors looking to profit from cryptocurrency fluctuations.
Since its inception, BTF has attracted many investors who want to participate in both the Bitcoin and Ethereum markets.
Bitwise Ethereum Strategy ETF (AETH)
AETH is an Ethereum futures strategy ETF launched by Bitwise that focuses on Ethereum futures contracts and also does not involve holding spot. Bitwise is a pioneer in the cryptocurrency index fund space and its ETF products are known for their transparency and compliance. AETH is a low-barrier option for investors who want to participate in the Ethereum market through traditional financial instruments.
Each of these ETFs offers different investment strategies and risk management methods, and is suitable for investors who are interested in the cryptocurrency market but do not wish to directly hold cryptocurrencies.
Can I buy Ethereum ETF in Taiwan?
As of now, Taiwanese investors are not able to purchase Ethereum ETFs directly in Taiwan’s local financial market. Taiwan’s financial regulators have a more conservative attitude towards cryptocurrency-related financial products and have not allowed Ethereum ETFs or other cryptocurrency ETFs to be listed and traded in Taiwan.
However, Taiwanese investors can still indirectly participate in Ethereum ETF investment through the following methods:
Overseas brokerage platforms: Taiwanese investors can open accounts with foreign overseas brokerages such as E*TRADE and Charles Schwab, and use these accounts to purchase Ethereum ETFs listed in the United States or other international markets. For example, asset management companies such as 21Shares and VanEck in the United States have launched Ethereum ETFs. These products have been approved by local regulators and listed on major exchanges.
Cryptocurrency exchanges: Although there is no Ethereum ETF in Taiwan, investors can still purchase Ethereum directly on global or local cryptocurrency exchanges (such as Binance, Coinbase, etc.) and hold these cryptocurrencies as investments. While this is not the same as investing in ETFs, a similar effect of market exposure can be achieved.
Before investing, it is recommended to have a thorough understanding of local and international legal and tax issues to ensure the compliance and safety of the investment.
Risks of Investing in Ethereum ETFs
The risks of investing in Ethereum ETFs mainly come from the volatility of the cryptocurrency market and related technical and legal issues. The following are the main risks that you must be aware of before investing in Ethereum ETFs:
Market Volatility: The prices of cryptocurrencies such as Ethereum are extremely volatile and prices can fluctuate significantly over short periods of time. Investors may face larger price losses.
Technical risks: As part of blockchain technology, Ethereum may face problems such as technical vulnerabilities, hacker attacks, or network outages.
regulatory risk: The legal and regulatory environment for cryptocurrency continues to change. The regulatory policies of different countries vary greatly, and more stringent regulatory measures may appear in the future, which may limit the development of Ethereum ETFs and even affect its legitimacy.
。Liquidity Risk: Although Ethereum is the largest cryptocurrency by market capitalization, liquidity may decrease under certain market conditions.
Futures contract risks: If you want to invest in futures Ethereum ETFs, there are risks unique to the futures market, such as swapping positions at contract expiration, premiums or discounts, etc., which may result in the value of the futures contract being inconsistent with the spot price. This exposes investors to additional market risks.
Management Fees and Operating Costs: Cryptocurrency ETFs typically have higher management fees than traditional ETFs. These fees can gradually erode investors' returns.
In summary, although investing in Ethereum ETFs can simplify the cryptocurrency investment process, it is still accompanied by considerable market, technical and regulatory risks, and investors need to fully understand these risks before considering investing.
How do I choose the Ethereum ETF that’s right for me?
After you have a clear understanding of the risks of Ethereum ETF and you have determined that you are a suitable investor to purchase Ethereum ETF, you can make a comprehensive consideration based on your own investment objectives, risk tolerance and investment period.
CryptoCity has compiled several important considerations to help you make an informed choice:
Investment objectives: Whether you want long-term growth or short-term trading, the former is suitable for spot ETFs and the latter is suitable for futures ETFs.
Risk Tolerance: If you can tolerate high volatility and high risk, futures ETFs are ideal; conversely, spot ETFs are more stable.
Fee structure: Futures ETF management fees are relatively high, while spot ETF management fees are relatively low. Choosing products with reasonable fees can avoid unnecessary cost losses.
Liquidity and Trading Volume: Choosing an ETF with high liquidity and trading volume can reduce transaction costs and provide more flexibility to buy and sell when needed.
Regulation and security: Choosing regulated and transparent ETFs can effectively reduce investment risks and ensure the safety of assets.
Competition and innovation: Selecting ETFs that are innovative and closely related to Ethereum applications can help capture potential growth opportunities.
The future of Ethereum ETFs
First, spot Ethereum ETFs will continue to be a major contributor to market growth.
BlockMagazine also believes that the simplicity and transparency of Ethereum spot ETFs have gradually made it a standard choice in the market. As regulatory agencies such as the U.S. Securities and Exchange Commission (SEC) approve more spot products, the market for such ETFs will grow in the future. Demand is expected to continue to grow.
That being said, the launch of futures and portfolio Ethereum ETFs will also increase as the market matures. These ETFs not only offer flexible investment strategies but also allow investors to make short-term investments through the volatility of the futures market. In particular, portfolio ETFs combine the advantages of spot and futures, allowing investors to gain greater market opportunities while diversifying risks.
Foley & Lardner LLP, a law firm familiar with the development of innovative technologies, also stated that as the regulatory framework gradually improves, institutional investors’ demand for Ethereum ETFs will continue to rise. Because these investors often seek investment products with high compliance and transparency, as more traditional asset management companies launch Ethereum ETF products, the inflow of institutional funds may further promote the stable growth of the Ethereum market. Institutional investors participate.
In addition, BlockMagazine believes that low-cost ETF products may become mainstream in the market in the future. This is because as the number of Ethereum ETFs increases in the market, competition among major asset managers will also increase, which may lead to a decrease in ETF management fees. .
Finally, further clarification of regulatory policies will provide protection for the development of Ethereum ETFs. As regulators gradually introduce specific regulations for cryptocurrencies, market compliance will be improved, which will further increase investor confidence and promote the healthy development of the ETF market. These policies will cover aspects such as transparency, asset management, and investor protection, thereby providing a safer investment environment for market participants.
Overall, with technological advancement, improved supervision, and increased market demand, the future development prospects of Ethereum ETF are very bright, and it is expected to become a mainstream investment tool in the cryptocurrency market.
