Tuesday will be a big day for the crypto industry as the Securities and Exchange Commission (SEC) has finally approved spot Ethereum ETFs. These funds are expected to start trading, a move that could see substantial sums of money flowing to Ethereum.
The ETFs that will go live are the Grayscale Ethereum Mini Trust (ETH), Franklin Ethereum ETF (EZET), VanEck Ethereum ETF (ETHV), Bitwise Ethereum ETF (ETHW, and 21Shares Core Ethereum ETF (CETH).
The other spot Ethereum ETFs are the Fidelity (FETH), Blackrock (ETHA), and Grayscale Ethereum Trust (ETHE). ETHE will be a conversion from the current format of a trust into a spot ETF.
Spot Ethereum ETF approved
The approval of spot Ethereum ETFs is another win by Polymarket, where traders have proven accurate. As I wrote on Monday, most of the bets were that the ETFs would be approved by July 26th.
This approval is important for the crypto industry because the Securities and Exchange Commission (SEC) has been concerned about Ethereum because of its staking features.
Staking is a process where users delegate their tokens to secure a blockchain network. These users then generate a monthly return, which stands at 3.35%. The SEC has long believed that investors should be more protected by ensuring that Ethereum is a regulated asset.
Therefore, the approval opens the door for more altcoin ETFs. Some of the most notable cryptocurrencies that could see ETF applications are the likes of Cardano, Solana, Binance Coin, and Ripple (XRP).
The case for Ethereum and its ETFs
Ethereum ETFs will likely have significant demand from investors as evidenced by the vast sums of money in the Grayscale Ethereum Trust (ETHE). The trust has accumulated almost $9.9 billion in assets despite its 2.50% fees. As such, in this case, a $10,000 investment attracts an annual $220 fee.
These funds will see more inflows from institutional investors like hedge funds, private equity funds, and pensions. Recent data showed that some of the top players in the financial services industry had accumulated Bitcoin ETFs.
Some of thse companies are Millenium Management, a $67 billion hedge fund, Susquehanna, Apollo Global Management, Morgan Stanley, and Jane Street.
These funds prefer to invest in ETFs because of the difficulty of buying and storing cryptocurrencies. This storage, when not done through a custodian, can be risky because of the keys involved. ETFs are stocks, meaning that users can buy and sell their positions by just clicking a button.
In a statement this week, Jay Jacobs of Blackrock made the case for Ethereum. For one, he noted that Ether has a long history of beating Bitcoin in terms of performance. Ethereum has risen by 1500% in the past 5 years while Bitcoin is up by 586% in the same period.
He also noted that Ethereum has a strong utility, being the main blockchain for industries like decentralized finance, tokenization, stablecoins, and non-fungible tokens. Bitcoin, he argued, had attracted users because of its scarcity.
Here’s BlackRock’s Ether pitch to normies via @JayJacobsCFA: “While many see bitcoin’s key appeal in its scarcity many find ethereum’s appeal in its utility.. you could think of ethereum as a global platform for applications that run without decentralized intermediaries” $ETHA pic.twitter.com/ffyglfSTiB
— Eric Balchunas (@EricBalchunas) July 22, 2024
Best Ethereum ETF to buy
As I have written before, for retail traders will do well by just investing in Ethereum through one or more exchanges and staking it. By investing in these ETFs, you agree to pay an annual fee and forego the staking rewards that come with it. Data shows that Ethereum yields about 3.40%, meaning that a $10,000 investment will bring in $340 in fees.
So, which is the best Ethereum ETF to buy when they start trading on Tuesday? Data shows that most of these ETFs will have a fee waver, meaning that users will not need to pay anything for a while.
Funds by Grayscale, Franklin Templeton, VanEck, Bitwise, 21Shares, and Fidelity will have a full waver. Blackrock has a waver, where users will pay a 0.12% expense ratio while Invesco’s fund will not have a waver.
In this case, the best Ethereum ETF to buy in terms of wavers is VanEck’s ETHV ETF that will have a 12 month 0% fee period. After that, the fund will charge a reasonable 0.19% expense ratio.
Franklin Templeton’s EZET will have a waiver period that will end on January 31st next year and then have an expense ratio of 0.19%.
Therefore, based on fees, I believe that the best Ethereum ETF to buy will be the Grayscale Ethereum Mini Trust (ETH) that will have a 6-month waiver followed by a fee of 0.15%.
While the iShares Ethereum Trust (ETHA) will likely attract more inflows, it is not the best fund as it will charge a 0.12% instantly followed by a 0.25% ratio. Therefore, if you invest $100,000 in ETHA after the waiver, your annual fee will be $250.
A similar investment in Grayscale’s Mini Trust will attract a $150 fee. So, since these are similar assets, it makes sense to invest in the cheaper one. The other best ETH ETF will be Franklin’s EZET, VanEck’s ETHW, and Bitwise’s ETHW.
What are we expecting today for the Ethereum ETFs?
We expect them to begin trading tomorrow. That means we should see a bunch of filings on SEC site today that say the ETFs’ prospectuses have gone “effective”. Likely after or around market close. Here are the race entrants: pic.twitter.com/AkBxEjBRvv
— James Seyffart (@JSeyff) July 22, 2024
