The number of ETFs tied to cryptocurrencies is expanding dramatically in the first week of October. Ether Futures EFTs debut on Monday. The rush of excitement that accompanied the nine new Ether Futures EFTs debut, appears to have yielded little in the way of investment dollars in comparison.
Ether is already the second most popular cryptocurrency, behind bitcoin, but the arrival of the ETFs may make it easier for certain types of investors to gain exposure to that part of the crypto market.
Crypto EFTs debut news
“I think the long-term buyers of these products are financial professionals like financial advisors, family offices,” and registered investment advisors, said Bitwise CIO Matt Hougan. “Retail traders can get exposure to ethereum through a Coinbase app, but a financial professional can’t invest through a phone,”
Ether Futures EFTs products
Ether Futures EFTs debut with products and their net expense ratios, include:
- BitWise Ethereum Strategy ETF (AETH), 0.85%
- Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP), 0.85%
- ProShares Ether Strategy ETF (EETH), 0.95%
- ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE), 0.95%
- Bitcoin & Ether Market Cap Weight Strategy ETF (BETH), 0.95%
- VanEck Ethereum Strategy ETF (EFUT), 0.66%
Bitcoin futures ETFs already exist, led by the ProShares Bitcoin Strategy ETF (BITO), which holds about $900 million in assets. The fund has slightly lagged the price of spot bitcoin since inception in 2021, when bitcoin was near an all-time high.
“The thing that people wanted to find out was would a bitcoin futures ETF do its job? Would it track the performance of bitcoin? And in fact it has done that quite well,” said Simeon Hyman, head of the investment strategy group at ProShares.
Ether futures SEC decision
The launch of ether futures funds comes as the SEC is mulling its next steps over a potential spot bitcoin ETF. The SEC regulator has repeatedly blocked products like Ether futures from launching in recent years, but a judge ruled in August that its reasoning against converting the Grayscale Bitcoin Trust into an ETF was flawed.
Many firms have active applications to launch their own bitcoin ETF, including mainstream money managers like BlackRock and crypto-focused ones like Bitwise, though the SEC has so far delayed a decision on those applications. The launch of the ether futures products may be a reason for optimism that spot bitcoin products will be approved.
“I do think the approval and launch of these [ether futures] products is a positive sign that we’re on the path to spot crypto products in the relatively near future,” Hougan said.
Tax treatment
One notable difference among the funds launching Monday is that VanEck’s ETF is structured as a C-Corp., which will change its tax treatment. One of those differences is that the fund will pay a corporate tax in exchange for lower tax rates on distributions, according to Kyle DaCruz, VanEck’s director of digital asset product.
“On a pre-tax basis performance-wise, in a bull market you might see a C-Corp fund underperform the others. But that’s kind of apples to oranges. The C-Corp benefits really don’t shine through until the after-tax performance basis,” DaCruz said.
Ether Futures EFTs change in strategy
Ether futures ETFs had something of a false debut last week, when Valkyrie briefly began and then reversed its plan to change its Bitcoin Strategy ETF (BTF) into a product that held both ether and bitcoin strategies. The company said Friday afternoon that it expects the change to take place by Tuesday instead.
Grayscale Ethereum fund conversion
Also announced by Grayscale on Monday that it has filed an application to convert its Ethereum Trust into an ETF.
Grayscale Investments in conjunction with NYSE Arca has filed for approval from the U.S. SEC to convert the Grayscale Ethereum Trust (ETHE) to a spot Ethereum ETF.
Crypto market update
Spot prices for bitcoin rallied on Monday, hitting their highest level since mid-August. The price of Ether rose on Monday morning before reversing course in afternoon trading.