An ETF for Bitcoin has provided traditional investors with the means to diversify their crypto holdings, while traders prepare themselves for an Ether product – but the road could prove treacherous.
Investors were hoping an ether ETF would follow in the footsteps of bitcoin’s ETF approval, but comments by SEC Chairman Gary Gensler quickly dashed such hopes.
SEC Approves Grayscale’s Ether ETF
Grayscale’s bid to establish a spot bitcoin ETF finally received the SEC’s blessing Wednesday when they approved 12 filings to convert its futures ETFs into spot ETFs.
ETFs offer investors easier and more affordable access to crypto assets like Ethereum. ETFs trade on stock exchanges and provide liquidity and the option to buy or sell shares at any time during trading hours – however they do incur more risk as investing involves futures contracts which don’t always reflect price of cryptocurrency directly.
Investors who invest in ETFs will be exposed to risks related to the futures contracts underlying them, including leverage, liquidity and funding rates, taxation of profits and losses and possible tracking error. ETFs will also fall under SEC registration and reporting requirements.
SEC Approves Grayscale’s Ether Futures ETF
After months of speculation and anticipation, the Securities and Exchange Commission approved exchange-traded funds (ETFs) that track bitcoin prices. The approval triggered a temporary rally in cryptocurrency prices; however, SEC’s decision dampened hopes for an Ether ETF as well.
Gary Gensler of the Securities and Exchange Commission issued a warning to investors that his agency remains highly wary of cryptocurrencies such as bitcoin. Furthermore, listing ETFs would not imply their approval or endorsement by him or the SEC.
This decision revealed that the SEC treats spot and futures ETFs differently, raising the bar for potential issuers of crypto ETFs as they must demonstrate why treating spot and futures ETFs equally is appropriate.
BlackRock, the asset management firm that filed the first ETF application, recently made the case that there is no lawful justification for treating two products differently. But this SEC decision doesn’t imply that BlackRock’s application will be approved or that any others’ will.
SEC Approves First Ether ETF
On Monday, two ether-focused exchange-traded funds were introduced, providing small investors access to the second-largest cryptocurrency in their brokerage accounts. Unfortunately, neither fund has seen much enthusiasm among investors.
Investors had high hopes that an Ether ETF would follow in the footsteps of Bitcoin and gain approval by the SEC, but Gary Gensler, Chairman of the SEC’s Division of Trading and Markets poured cold water on those hopes in his statement following bitcoin ETF decision.
Wall Street asset-management giants BlackRock and Invesco have not hesitated to file for spot ether ETFs that track real-time prices of the digital asset, known as Ether. Staking will allow holders of these ETFs to reap rewards by pledge their tokens towards operating Ethereum’s blockchain – something their backers believe could add an attractive layer to their offerings while helping avoid some of the common risks encountered with crypto-focused ETFs.
SEC Approves First Ether ETN
After an extended lull in ETF launches focusing on Ethereum, several ETFs have recently made headlines: VanEck Ethereum Strategy ETF (ticker EFUT), Bitwise Ethereum Strategy ETF, and Bitwise Bitcoin and Ether Equal Weight Strategy ETF have made waves recently.
These funds use futures contracts and give investors exposure to either the performance of ether or a 50/50 portfolio of bitcoin and ether. Furthermore, they enable investors to track these assets easily within one brokerage account, potentially driving flows.
However, these ETFs may not spark much of an interest in Ether due to its much greater volatility than bitcoin. Furthermore, none of BlackRock, Invesco and Ark’s current applications for spot ether ETFs include staking as part of their investment thesis – something the SEC had been reluctant to allow in prior crypto ETFs. That doesn’t rule out more ETFs dedicated to Ether emerging in future.
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