The number of ETFs tied to cryptocurrencies is expanding dramatically in the first week of October, with a wave of funds that buy ether futures launching on Monday.
Ether is already the second most popular crypto currency, 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.
“I think the long-term buyers of these products are financial professionals — 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,”
The ether futures products launching Monday, and their net expense ratios, include:
BitWise Ethereum Strategy ETF (AETH), 0.85%
Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP), 0.85%
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.
ProShares BITO still has about $900 million in assets despite crypto prices falling sharply since its launch.
The launch of ether futures funds comes as the Securities and Exchange Commission is mulling its next steps over a potential spot bitcoin ETF. The regulator has repeatedly blocked such products 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.
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.
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 ETFs had something of a false start 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 also announced on Monday that it has filed an application to convert its Ethereum Trust into an ETF.