What the Ethereum ‘Merge’ Means for ETFs

The upcoming Ethereum “Merge” this week will revolutionize the platform and could be a boon for some crypto-focused exchange-traded funds. 

The long-awaited upgrade—a first for any such digital asset—will transition the smart-contract platform from proof-of-work to proof-of-stake, which will drastically cut energy consumption and make the technology much more environmentally friendly. According to ethereum.org, the next phase of the platform will cut energy usage by approximately 99.95%. 

Sustainability has been a major criticism for the current iteration of digital assets that use more electricity annually to create new coins than some industrialized nations, including Argentina, according to a report by Columbia University. 

The Merge will make those criticisms obsolete—at least for ethereum. 

The 'Natural Choice'

“It sets the stage for a new chapter for institutional investors,” said Ric Edelman, founder of the Digital Assets Council of Financial Professionals, a consultancy focusing on cryptocurrency.  

For investors looking to participate in the growth of ethereum, ether is the natural choice.  

“Folks are very bullish, and many believe ether will eventually overtake bitcoin in market share,” he said during a panel at the wealth management conference Future Proof in Huntington Beach, California. 

While there are currently no ether ETFs trading in the U.S., investors can consider the over-the-counter Grayscale Ethereum Trust (ETHE), which trades with a 25% discount to its net asset value, or funds in Canada, like the Purpose Ether ETF (ETHH).  

“The problem with bitcoin is it’s dumb,” Edelman said during the panel, referring to the “bigger and broader” use cases for ethereum. 

Outside of traditional brokerage accounts, investors can also purchase ether through crypto platforms like Coinbase or even digital wallets like Cash App and Venmo.  

While investors may lose considerable amounts of money in cryptocurrency-focused funds, the benefits could be tenfold, Bitwise Asset Management’s Chief Investment Officer Matt Hougan said during the panel. The issue is that most investors aren’t educated enough about the potential of the technology 

“People are just reflexively skeptical,” he said. “It’s not a new way to buy a cup of coffee.” 

Contact Sean Allocca at [email protected]