The first trading session of October 2023 also marks the launch of the very first U.S.-listed ETFs holding ether futures. Ether is the cryptocurrency of the Ethereum platform. Bitwise, ProShares, and Van Eck collectively rolled out a total of six funds that hold such futures. Additional similar funds from other issuers are in the works.
VanEck started the latest Ethereum ETF frenzy with the announcement on Thursday that the launch of its VanEck Ethereum Strategy ETF (EFUT) was imminent. That coincided with a flurry of re-filings for similar ETFs. But those funds are only the start. There are more such futures ETFs in registration, and more such physical ETFs are also in the pipeline.
Concerned about the potential for a government shutdown (now averted), the SEC focused last week on cleaning up its backlog. It approved the launches of the ether futures ETFs. However, it pushed off the approval of the ARK 21 Shares spot bitcoin fund.
The Ethereum Wave Gets Rolling
On Monday, VanEck launched EFUT, which is largely differentiated by the fact that it is a C-Corp fund, a structure that conveys certain tax advantages. Bitwise launched two funds of its own, the Bitwise Ethereum Strategy ETF (AETH) and the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP). Those funds respectively offer exposure to the performance of ether futures and to a 50/50 portfolio of bitcoin and ether futures. Both have expense ratios of 0.85%.
ProShares jumped into the pool with three funds. The ProShares Ether Strategy ETF (EETH) targets ether futures to capture the performance of the cryptocurrency. The ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE), like Bitwise’s BTOP, offers exposure to a regularly rebalanced equal-weighted portfolio of bitcoin and ether futures. And the ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (BETH) holds a similar blended portfolio that weights the two cryptocurrencies by their market capitalizations. All three have expense ratios of 0.95%.
However, there are other funds yet to debut that will also hold such futures. The Volatility Shares Ether Strategy ETF (ETHU), with a 1.15% expense ratio, and the Hashdex Ether Strategy ETF (EX), with an expense ratio of 0.98%, are both in the queue to launch.
Meanwhile, Valkyrie has filed a supplement to its Valkyrie Bitcoin Strategy ETF (BTF) with the intention of adding ether futures to the fund’s portfolio.
Spot Ether Funds in the Queue
While there doesn’t seem to be any sign that spot ether ETFs are any more likely to be approved than spot bitcoin ETFs, Grayscale is pushing to convert its Grayscale Ethereum Trust (ETHE) into an ETF, just as it wants to do with the Grayscale Bitcoin Trust (GBTC). The NYSE recently filed a 19b-4 form with the SEC to that end, Grayscale announced Monday.
An appeals court recently rejected the SEC’s reasoning in its refusal to approve the conversion of GBTC into an ETF. However, that doesn’t mean the regulator can’t present another argument against the approval going forward. Some see the approval of ether futures ETFs as a sign that spot cryptocurrency funds may also be nearing approval.
And Invesco is looking to roll out the Invesco Galaxy Ethereum ETF, which does not yet have a ticker but will be structured as a 1933 Act fund and will actually hold the cryptocurrency. In other words, both Grayscale and Invesco are in a race to launch a spot Ethereum fund.
ARK and 21Shares have teamed up to file for the ARK 21Shares Ethereum ETF, which would also provide exposure to spot ether. The SEC will issue a decision in January on the two firms’ proposed ARK 21 Shares Bitcoin ETF, which would provide spot exposure to bitcoin.
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