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SEC Approves Ether ETFs as Crypto Moves Closer to Mainstream
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The U.S. Securities and Exchange Commission has approved the first ethereum exchange-traded funds, another milestone for cryptocurrency advocates and investors following the debut of bitcoin ETFs earlier this year.
The ether ETFsincluding the conversion of a $9.3 billion Grayscale investment fund and new offerings from bitcoin ETF giants BlackRock and Fidelity, won SEC approval on Monday afternoon, with trading scheduled to begin as early as Tuesday, according to fund sponsors. The SEC did not immediately respond to a request for comment.
Ether is the native cryptocurrency of the Ethereum blockchain and is the second largest crypto token in the world, behind Bitcoin, with a market capitalization of around $415 billion.
The approvals, which follow those for ether futures ETFs last year, give the cryptocurrency a firmer footing Traditional USA finance after the launch of the first spot bitcoin ETFs in the US in January.
“Traditional asset management can no longer ignore crypto as an asset class,” said Matt Hougan, chief investment officer at crypto fund sponsor Bitwise. “I think you’ll see effectively everyone embrace this space.”
As was the case with bitcoinEthereum ETF issuers are vying for investor interest with a relatively narrow range of fees. Final charges for all but one of the products would be below 0.25 percent, with at least five issuers planning to waive fees entirely at the outset, according to data compiled by Bloomberg Intelligence.
There is one glaring exception to the price war: Grayscale Investments will maintain the 2.5 percent management fee for its large converted ethereum ETF while seeding a “mini” version with 10 percent of the larger ETF’s assets. The smaller sibling is expected to have the lowest post-waiver fee of the initial ether ETFs at 0.15 percent.
Grayscale also kept the management fee for its bitcoin ETF at 1.5 percent in January — down from an initial 2 percent but still well above its competitors. That decision has generated $160 million in fee revenue for Grayscale’s bitcoin ETF so far in 2024, the third-highest of any U.S. ETF and good for 2 percent of all U.S. ETF revenue. according to Bryan Armour, director of passive strategies research at Morningstar.
These ether products are not expected to initially attract as much investment as bitcoin ETFs, into which investors have poured more than $17 billion in new money in the past six months since their launch.
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While the Ethereum blockchain has a wide range of uses beyond storing value, investors may not be able to understand it, unlike the common reference point for Bitcoin as “digital gold,” said Tim Ogilvie, global head of institutional at Kraken, a U.S. cryptocurrency exchange.
“I would be surprised if you see a similar explosive start for ETH,” Ogilvie said.
Hougan predicted that ether ETFs would attract about $15 billion in their first 18 months on the market. He added that flows into the new funds “may be a little choppy” in the summer.