Best Ethereum ETFs to Watch in 2024

On May 23, 2024, the US Securities and Exchange Commission (SEC) approved eight spot Ethereum ETFs for trading in the US market. These ETFs are set to be listed on US exchanges Nasdaq, CBOE, and NYSE, potentially launching by July 23, 2024, following the submission of final offering documents. This announcement marks a pivotal moment in the cryptocurrency market, underscoring a significant shift in the regulatory landscape for crypto in the US. The approval of spot Ethereum ETFs comes four months after the SEC approved spot Bitcoin ETFs, sending global financial markets into a frenzy and helping cryptocurrencies gain legitimacy as an investment class. 

 

“After careful review, the Commission finds that the Proposals are consistent with the Exchange Act and rules and regulations thereunder applicable to a national securities exchange,” said SEC Chair Gary Gensler.

 

Even as global investors await the launch of spot Ether ETFs in the US, on April 30, 2024, six spot bitcoin and ether ETFs debuted in Hong Kong with mixed results amid lukewarm trading, marking the first such launch in Asia. The ETFs, launched by China AMC, Harvest, and Bosera, saw modest gains and losses, with a total first-day turnover of $112 million, significantly lower than the U.S.'s $4.6 billion. 

 

The launch places Hong Kong in direct competition with the U.S. for crypto investors, with local firms like HashKey Group optimistic about the market's growth. Hong Kong's ETFs feature an "in-kind" transaction mechanism, allowing trades using crypto tokens, which could attract investors. However, higher management fees and limited approved trading platforms present challenges. Analysts suggest that increased regulatory approval could lower costs and enhance competitiveness.

 

In this article, we explore the top Ethereum ETFs as we await the SEC's decision on spot Ethereum ETFs. Discover the leading funds, learn how to choose the best spot Ether ETF, and understand effective investment strategies.

 

An Ethereum ETF, or Ether ETF, is an investment vehicle that seeks to track the spot market price of Ether, the native currency of the Ethereum blockchain. These ETFs allow investors to buy shares that track the Ether price by holding Ether futures contracts, while some hold a mix of Ether and Bitcoin futures. They will be traded on traditional US stock exchanges, enabling investors to gain Ether exposure without dealing with the complexities of buying and storing the Ether itself.

 

The Ether ETF offers several benefits for investors. By being purchasable through a simple stock transaction, Ether ETFs provide investors and institutions with a quick, convenient, and safer way to gain regulated access and exposure to incorporate Ether into investment portfolios. This could lead to increased liquidity, greater market participation, and a broader acceptance of Ether as a legitimate financial instrument.

 

Here’s more information on what an Ethereum ETF is and how it works. 

 

The approval of Ether ETFs follows a strict process, highlighting the SEC’s measured approach to cryptocurrency regulation. The process involves a two-step approach: the approval of the 19b-4 filings followed by the review and approval of each fund’s individual S-1 registration applications. Both 19b-4 and S-1 forms must be approved before the Ether ETFs can be launched.

 

First Step: Approval of the 19b-4 Forms

The SEC approved eight Ether ETF issuers' 19b-4 forms to list spot ETFs on various US exchanges on May 23, just five months after approving Bitcoin ETFs. 19b-4 forms are regulatory filings used by exchanges to propose new rules or change existing ones, directly impacting whether the SEC will approve the product for trading on an exchange.

 

Second Step: Approval of S-1 Registration Forms

The second step is for each individual issuer to get their registration statement or S-1 forms approved. These forms are required by the SEC for ETFs to list securities and establish exchange agreements through multiple rounds of SEC communication. S-1 forms include information about the company and prospectuses for their ETF products. This process usually involves feedback from the SEC, prompting changes to be made by the ETF issuers. It is expected to take several weeks or at most several months.

 

Initially, the timeline for this process was unclear. However, during a June 13 Senate Banking Committee hearing, SEC Chair Gensler provided a broader timeframe, suggesting that the SEC might approve S-1 registration statements for these ETFs during Summer 2024. As of mid-July, industry sources indicated that trading could begin as early as July 23, 2024.

 

The SEC has given preliminary approval to at least three of the eight asset managers hoping to launch exchange-traded funds tied to the spot price of Ether to begin trading on July 23, 2024. Trading in these products is expected to begin the next day, marking another major win for the cryptocurrency industry's campaign to push digital assets into the mainstream.

 

If you want to go the ETF way to invest in Ethereum, here are the best ETH ETFs you can consider as of July 2024: 

 

 

Dive deep into the world of Bitcoin ETFs.

 

Grayscale Ethereum Trust (ETHE) 

The Grayscale Ethereum Trust (ETHE) is a significant investment vehicle for those looking to gain exposure to Ethereum without directly buying, storing, or managing the cryptocurrency. Managed by Grayscale Investments, LLC, a subsidiary of Digital Currency Group, ETHE provides an indirect way to participate in Ethereum's market potential. As of July 2024, the trust holds over $10.15 billion in assets. Investing in ETHE offers several benefits, such as bypassing the complexities of managing and securing Ethereum directly. The trust's shares are registered under Section 12(g) of the Securities Exchange Act of 1934, adding a layer of regulatory oversight and transparency. 

 

ETHE is not a traditional spot or futures ETF but a trust that directly holds Ethereum. This means the value of ETHE shares is linked to the current (spot) price of Ethereum. Investors own shares representing a portion of the Ethereum held by the trust. Grayscale has filed for the conversion of ETHE into a spot ETF, which would allow for direct investment in Ethereum if approved. This conversion is currently under review by the SEC, with significant investor interest in its potential approval​. The Grayscale Ethereum Trust remains a top choice for Ethereum exposure, with its substantial asset base and ongoing efforts to transition to an ETF structure.

 

21Shares Ethereum Staking ETP 

The 21Shares Ethereum Staking ETP (AETH) is an innovative product designed to track the investment results of Ethereum (ETH) while generating additional returns through staking. Managed by 21Shares AG, a leading provider of cryptocurrency ETPs, this product offers exposure to Ethereum with the potential for earning staking rewards, similar to earning interest in traditional finance. AETH is 100% physically backed by Ethereum. By investing in AETH, you gain exposure to Ethereum's market performance and additional returns from staking, all within a regulated and transparent financial product.

 

As of July 2024, AETH manages assets worth approximately $535 million. It has shown a strong year-to-date return of 37.87% and a one-year return of 71.85%, reflecting both the appreciation of Ethereum and the additional staking rewards. The ETP has a total expense ratio (TER) of 1.49%​. AETH is traded on various exchanges, making it accessible to investors globally. It is a spot-based product, which means it directly holds Ethereum, offering exposure to its current market price plus potential staking rewards. This structure provides a straightforward and efficient way to invest in Ethereum while benefiting from professional risk management and the convenience of an exchange-traded product.

 

XBT Provider Ethereum Tracker One (COINETH)

XBT Provider's Ethereum Tracker One (COINETH) is one of the leading Ethereum exchange-traded products (ETPs). As of July 2024, it boasts total assets of around $433 million, making it one of the largest Ethereum-backed ETPs globally​. COINETH aims to mirror the performance of Ethereum priced in USD. It offers investors exposure to the fluctuations in the USD/EUR exchange rate for certificates denominated in EUR. This financial product is a spot-based Exchange-Traded Note (ETN), which means it tracks the price of Ethereum closely, without using derivatives like futures contracts​. 

 

When you invest in COINETH, you own shares of the ETN, which are backed by actual holdings of Ethereum. This direct backing by Ethereum distinguishes it from products that rely on futures contracts, providing a straightforward way to gain exposure to Ethereum's current market price. COINETH is traded on a stock exchange and is accessible through various brokers and banks, making it convenient for investors. COINETH’s proof of reserves, provided by external auditors, enhances its transparency and reliability, ensuring that the outstanding obligations are adequately collateralized by Ethereum holdings. 

 

CI Galaxy Ethereum ETF (ETHX.B) 

CI Galaxy Ethereum ETF (ETHX.B) is managed by CI Global Asset Management, with Galaxy Digital Capital Management LP serving as the subadvisor. Galaxy Digital is known for its expertise in digital assets, cryptocurrencies, and blockchain technology. ETHX.B is a Canadian spot-based ETF that offers exposure to the spot price of Ethereum by holding the actual Ethereum tokens. When you invest in ETHX.B, you are buying shares of an ETF that directly holds Ethereum, rather than derivatives or futures contracts. This structure allows you to gain exposure to Ethereum's performance without the need to purchase or store the cryptocurrency directly.

 

As of July 2024, ETHX.B has total net assets of approximately 579 million CAD (423 million USD). The ETF trades on the Toronto Stock Exchange (TSX) in both Canadian dollars (CAD) and US dollars (USD), providing flexibility for investors. It has shown strong performance, with a one-year return of 61.62%​. It is considered a high-risk investment due to the speculative nature and volatility of the Ethereum market. Therefore, it is appropriate for investors who can absorb potential losses. CI Galaxy Ethereum ETF (ETHX.B) is a robust option for gaining direct exposure to Ethereum. Its physical backing by Ethereum and spot-based approach make it a reliable choice for those looking to invest in this leading cryptocurrency.

 

Purpose Ether ETF (ETHH) 

The Purpose Ether ETF (ETHH) is the world’s first physically settled Ether ETF, providing a straightforward way for investors to own Ether in their investment accounts. Managed by Purpose Investments, ETHH offers exposure to Ethereum by physically holding the cryptocurrency, ensuring that your investment is directly linked to the actual market price of Ether. ETHH holds 100% physically settled Ether, stored securely offline in "cold" storage, which is disconnected from the internet to prevent hacking. An online "hot" wallet is used only for transitory purchases when buying and selling Ether. As of July 2024, the Purpose Ether ETF (ETHH) has net assets of approximately $342 million, a year-to-date return of around 60.82%, and a total expense ratio (TER) of 1.50%, making it a cost-effective option for gaining exposure to Ethereum​. 

 

The ETF is designed to track Ethereum's spot price, allowing you to invest in Ether directly rather than through derivatives or futures contracts. This means your investment closely follows the current market value of Ethereum​. In addition to tracking the price of Ethereum, ETHH aims to generate returns by harvesting volatility-rich premiums. This approach provides the potential for additional yield beyond just price appreciation​. The majority of the ETF’s holdings are kept in cold storage to enhance security. This method of storage is considered one of the safest ways to store cryptocurrencies​. 

 

The crypto market is buzzing with anticipation following the SEC's approval of 11 Spot Bitcoin ETFs on January 10, 2024. However, the SEC has postponed its decision on BlackRock and Fidelity's spot Ether ETFs until June 2024, marking the second delay after the initial postponement in January. The next critical deadline is for VanEck’s spot Ethereum ETF, set for May 23, 2024. Market analysts believe the SEC's stance on these applications will become clearer after this date.

 

Several prominent Ethereum ETF applications are currently awaiting approval from the SEC:

 

• BlackRock iShares Ethereum Trust: BlackRock filed its application in late 2023. This ETF aims to offer direct investment in Ethereum, potentially boosting market confidence and accessibility. The SEC has given preliminary approval, and a decision is expected by July 22, 2024.

• Fidelity Ethereum Spot ETF: Fidelity's application, which initially included Ethereum staking features, is now expected to be approved alongside others in July. This ETF aims to provide additional returns through staking, although the staking feature has been removed to align with SEC regulations.

• VanEck Ethereum Strategy ETF (EFUT): Known for its pioneering role, VanEck's application has received preliminary approval, and the final decision is anticipated by July 22, 2024. The company updated its filing to strengthen its position amid increasing market interest.

• Franklin Templeton Ethereum ETF: Filed in early 2024, Franklin Templeton's application has also received preliminary approval, setting the stage for a potential launch on July 23, 2024. This ETF represents another major traditional finance firm entering the crypto space.

• 21Shares & ARK Invest Ethereum ETF: This joint application, notable for its initial staking plans, is expected to be decided in July 2024. The product aims to generate additional income through a diversified approach. The SEC has indicated that all applicants must state the fee attached to their spot Ether ETFs when submitting their amended S-1 filings.

• Hashdex Nasdaq Ethereum ETF: Filed in September 2023, this application integrates spot Ethereum holdings and futures contracts. The decision is expected in late July 2024.

• Grayscale Ethereum Spot ETF: Grayscale aims to convert its Ethereum Trust into a spot ETF, with a decision expected by July 22, 2024. This move is part of Grayscale's broader strategy to provide regulated investment avenues for digital currencies.

• Invesco & Galaxy Digital Ethereum ETF: This joint application’s decision is also expected by July 22, 2024. The ETF is designed to provide exposure to Ethereum’s spot price and has been given preliminary approval.

• Bitwise Ethereum Strategy ETF (AETH): Bitwise Asset Management has filed an application with the SEC to launch a spot Ethereum ETF, aiming to mirror Ethereum's price performance and address operational expenses. The SEC decision is expected by December 2024, allowing more time for the market to adapt.

These applications reflect significant interest from major financial institutions in integrating Ethereum into traditional investment portfolios. Approval of these ETFs could enhance Ethereum's market position and drive further institutional adoption.

 

The SEC is expected to decide on several Ethereum ETFs by May 2024. Despite some delays, the approval of Ethereum futures ETFs in the past suggests a potential positive outcome for spot Ether ETFs. As Ethereum continues to gain traction, many investors are looking to tap into its potential without directly buying and storing the cryptocurrency. Here's how to choose the right ETH ETF:

 

1. Evaluate ETH ETFs’ Cost and Performance

• Expense Ratio (TER): Every penny counts. Prioritize ETFs with a competitive Total Expense Ratio (TER), as it impacts your investment costs and potential returns. For instance, XBT Provider Ethereum Tracker One (COINETH) has a low TER of 1.50%, maximizing long-term returns.

• Liquidity: Liquidity is crucial for ease of trading. ETFs with substantial Assets Under Management (AUM), such as the Grayscale Ethereum Trust (ETHE) with over $10 billion in assets, often signify investor confidence and stability.

2. Tracking and Investment: Physical Ethereum vs. Derivatives

Some ETFs hold physical Ether, while others use derivatives. This distinction is crucial, especially with the growing emphasis on spot Ethereum ETFs. Choose according to your risk tolerance and investment goals. For example, CI Galaxy Ethereum ETF (ETHX.B) holds actual Ether, offering direct exposure, whereas 21Shares Ethereum Staking ETP (AETH) uses derivatives, which may carry additional counterparty risk.

 

3. Check Ethereum ETP’s Background and Reputation

Look for established financial institutions like VanEck, which has recently updated its filing for a spot Ethereum ETF, rekindling hopes for US approval. Established fund managers generally offer more reliability, and reviewing past performance provides insights into how the ETF has responded to different market conditions.

 

4. Assess Accessibility and Regulations

• Currency and Exchange: Ensure the ETF trades on an accessible exchange and in a convenient currency. Stay informed about local regulatory requirements, as regulations can change.

• Regulatory and Domicile Considerations: Understanding the legal framework offers insights into the security and operational standards of the ETF. Compliance with regulations is crucial for investor protection.

5. Review Market Volatility and Diversification

Understand the inherent risk of investing in a volatile asset like Ethereum. Consider diversifying your portfolio with other ETFs to mitigate risks.

 

You can invest in an ETH ETF just like a traditional ETF;  only ensure that you find an ETF that offers exposure to Ethereum. Here are the steps you can take when investing in Ethereum ETFs: 

 

1. Research and Selection: Conduct thorough research on available Ethereum ETFs to identify the one that best aligns with your investment goals, risk tolerance, and investment strategy. Ensure that the ETH ETF you select is available for investing in your country of residence.

2. Choose a Brokerage Account: Open an investment account with a brokerage or investment platform that offers access to the specific Ethereum ETF you intend to invest in. Ensure that the platform operates within your country and adheres to local regulations.

3. Fund Your Account: Deposit funds into your brokerage account to provide the capital for investing in the Ethereum ETF. The funding method and time can vary depending on the platform and your location.

4. Place an Order: Use your brokerage account to place an order to buy shares of the chosen Ethereum ETF. Specify the amount you intend to invest and review the details before finalizing the purchase.

5. Monitor Your Investment: Keep track of your investment in the Ethereum ETF and stay updated with the cryptocurrency market and ETF performance, especially regarding Ethereum ETF approvals and listings.

6. Be Aware of Regulatory Developments: Keep in mind that the regulatory landscape for Ethereum ETFs can vary. For instance, the SEC's recognition of Ether as a commodity when approving Ethereum futures ETFs suggests a likely approval of spot Ethereum ETFs in the near future​. Regulations and availability of Ethereum ETFs can vary by location. It's advisable to consult with a financial advisor to ensure compliance with applicable regulatory requirements.

Regulations and availability of Ethereum ETFs may vary based on your location, so it's advisable to consult with a financial advisor or investment professional and ensure compliance with any applicable regulatory requirements before proceeding with an investment in an Ethereum ETF.

 

Ethereum ETFs are attracting attention as they bridge the gap between traditional finance and cryptocurrencies, reflecting heightened institutional interest. The SEC has postponed its decision on several spot Ethereum ETFs to May 23, 2024, including applications from Hashdex and Grayscale. Approval of these ETFs could significantly boost Ethereum's growth, reinforcing its role in blockchain development and emerging sectors like Web3, NFTs, and DeFi. Analysts remain optimistic, suggesting that the SEC's previous approval of Ethereum futures ETFs lays the foundation for potential spot ETF approvals in 2024​. 

 

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