Overview of New Spot Ethereum ETFs: Fees, Promotions, and Holdings

The SEC has approved eight spot Ethereum ETFs as of July 23, 2024. These new offerings differ from existing strategy ETFs by directly investing in Ethereum, offering a more accurate price tracking with generally lower fees. Competition among issuers has caused a fee-cutting war, with several promotional offers now available. However, owning these ETFs means missing out on staking rewards from Ethereum.

On July 23, 2024, the SEC approved eight new spot Ethereum ETFs, marking a significant moment in the cryptocurrency world. These funds allow investors to directly invest in Ethereum, which sits as the second-largest cryptocurrency market-wise after Bitcoin. This follows the green light given for Bitcoin ETFs earlier that year.

Now, what exactly is a spot Ethereum ETF? In simple terms, it’s an exchange-traded fund that directly holds Ethereum. Unlike Ethereum strategy ETFs, which rely on futures contracts to track the cryptocurrency’s price, spot ETFs offer a more direct investment route. Moreover, Ethereum differs from Bitcoin as it supports decentralized applications and has moved to a more energy-efficient proof-of-stake system.

Before the wave of spot ETFs, several Ethereum strategy ETFs already existed, predominantly based on futures contracts. These ETFs don’t track the price of Ethereum as efficiently and often come with higher fees. The newly minted spot ETFs, however, stand out as they provide a more accurate price reflection.

Here’s a look at the eight different spot Ethereum ETFs currently trading, along with their fees and any pertinent promotions:
– Grayscale Ethereum Mini Trust (ETH): 0.15%, no special notes.
– Franklin Ethereum Trust (EZET): 0.19%, no special notes.
– VanEck Ethereum Trust (ETHV): 0.20%, currently waived until July 2025 or until reaching $1.5 billion in assets.
– Bitwise Ethereum ETF (ETHW): 0.20%, no special notes.
– 21Shares Core Ethereum ETF (CETH): 0.21%, no special notes.
– Fidelity Ethereum Fund (FETH): 0.25%, no special notes.
– iShares Ethereum Trust (ETHA): 0.25%, reduced to 0.12% until July 2025 or upon reaching $2.5 billion in assets.
– Invesco Galaxy Ethereum ETF (QETH): 0.25%, no special notes.
– Grayscale Ethereum Trust (ETHE): 2.50%, no special notes either.

A notable aspect leading up to the ETF approvals was the fierce competition among issuers to lower fees. Many filed amendments to their registration statements, hoping to lure in investors by undercutting rivals with lower fees. Some even introduced zero-fee promotions for the first few months of trading. This aggressive push for competitive pricing continues to play out following the SEC’s announcement.

However, it’s essential to keep information about fees and promotions updated—numbers could change quickly. Now, as for strategy ETFs, these are defined as any ETF investing at least 50% of assets into Ether futures. There are four such funds active now, sorted from lowest to highest fees:
– ARK 21Shares Active Ethereum Futures Strategy ETF (ARKZ): 0.70%, invested in Ether futures.
– ProShares Ether Strategy ETF (EETH): 1.00%, also in Ether futures. Fee temporarily set to 0.95% until September 2025.
– ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE): 1.00%, invested in both Bitcoin and Ether futures, fee reduced similarly.
– CoinShares Valkyrie Bitcoin and Ether Strategy ETF (BTF): 1.25%, investing in Bitcoin and Ether futures.

The recent approvals of these Ethereum ETFs pose a question: can they propel Ethereum further? They offer a new investment route for 401(k) and IRA investors, considering that nearly $40 trillion is held in retirement accounts, many of which can’t trade cryptos directly.
But the market’s immediate response didn’t jump as some might’ve anticipated. On July 23, the first trading day, Ether’s price registered a minor decline.

Comparing Ethereum ETFs to direct Ethereum ownership, the ETFs do provide some unique advantages, especially for investors lacking the ability to buy Ethereum directly. They could be cheaper and more reliable than Ethereum strategy ETFs. Still, potential investors should remember the drawbacks. Specifically, Ethereum ETF holders won’t earn staking rewards, which are available only through direct investment in Ethereum itself.