The long-awaited arrival of spot Ether exchange-traded funds (ETFs) in the US market marks a pivotal moment for cryptocurrency adoption. These publicly traded funds offer investors a convenient and regulated way to gain exposure to Ethereum (ETH) without the complexities of directly purchasing and storing the cryptocurrency.
The Chicago Board Options Exchange (CBOE) has officially confirmed July 23rd as the launch date for five ETFs: 21Shares Core Ethereum ETF, Fidelity Ethereum Fund, Invesco Galaxy Ethereum ETF, VanEck Ethereum ETF, and Franklin Ethereum ETF. These funds will be readily available for trading on the CBOE platform.
The remaining four spot ETH ETFs are expected to debut on either the Nasdaq or the New York Stock Exchange (NYSE) Arca on the same date, July 23rd. Although official announcements from these exchanges are still pending, the listing is widely anticipated.
The good news for investors is that virtually all major US brokerage platforms are primed to facilitate trading of these spot ETH ETFs. Every ETF set to launch in late July has secured regulatory approval to trade on at least one of the prominent exchanges: Nasdaq, NYSE Arca, or Cboe BZX.
Individual investors typically do not trade directly on exchanges. Instead, they rely on familiar brokerage platforms like Fidelity, E*TRADE, Robinhood, Charles Schwab, and TD Ameritrade to act as intermediaries. Once the ETFs are listed on public exchanges, investors can expect all major brokerages to offer seamless trading capabilities.
While nine spot Ether ETFs are poised to enter the market, their underlying mechanics are largely identical. Each fund is sponsored by a reputable financial institution, holds physical ETH with a qualified custodian, and relies on a team of market-makers to manage share creation and redemption. Additionally, they all share standard investor protections, including insurance against brokerage failures and cybersecurity threats.
For most investors, the primary consideration when choosing an ETF boils down to fees. Management fees for eight of the nine ETFs range from a competitive 0.15% to 0.25%. The outlier is the Grayscale Ethereum Trust (ETHE), which launched in 2017 under a different structure and currently charges a hefty 2.5% management fee.
Several ETFs are employing strategic fee structures to attract early investors. Most, but not all, are offering temporary fee waivers or discounts. Grayscale Ethereum Trust and Invesco Galaxy Ethereum ETF (QETH) are notable exceptions that maintain their standard fees.
Interestingly, a Grayscale product emerges as the frontrunner in the fee race. The Grayscale Ethereum Mini Trust (ETH), a newer fund designed specifically for ETF listing, boasts management fees of just 0.15%. These fees are even waived entirely for the first six months after launch, or until the fund reaches $2 billion in assets under management (AUM).
Another attractive option with competitive fees is the Franklin Templeton Franklin Ethereum ETF (EZET). At 0.19%, it offers the second-lowest management fees, with a full waiver until January 2025 or reaching $10 billion in AUM.
The Staking Conundrum
One crucial point to understand is that spot Ether ETFs will not offer staking capabilities at launch. Staking involves depositing ETH to a validator node on the Ethereum Beacon Chain, which earns rewards but also carries potential risks. While attractive due to its ability to significantly boost returns, staking wasn’t approved by the SEC for inclusion in these initial ETFs.
Liquidity concerns were cited as the primary reason for this decision. Staking typically involves a multi-day withdrawal period from the Beacon Chain, which creates an issue for issuers who need to promptly redeem ETF shares for underlying assets upon investor requests.
Efforts are underway to explore ways of incorporating staking into existing spot ETH ETFs, possibly through maintaining a buffer of readily available ETH. However, a workable solution is likely months away at best.
The arrival of spot Ethereum ETFs represents a significant step forward for cryptocurrency accessibility and mainstream adoption. Understanding the launch timeline, available platforms, fee structures, and current limitations on staking will empower investors to make informed decisions as they navigate this exciting new landscape.
