What Is a Spot Ethereum ETF? A Complete Guide
Here’s key data on the new crypto ETFs, and how they work.
Trading has begun for the new spot Ethereum ETFs. But what is Ethereum, how do the new cryptocurrency exchange-traded funds work, and how do they compare to bitcoin ETFs?
We provide all the details you need on the latest additions to the crypto ETF family, including a list of spot ether funds and their ticker symbols and expense ratios.
What Is a Spot Ethereum ETF?
A spot Ethereum ETF is a type of exchange-traded fund that passively tracks the price of ether (ETH), the cryptocurrency that provides liquidity for the Ethereum smart contracts blockchain. Unlike other types of crypto ETFs, spot ETFs don't use derivatives, such as futures, to track ether’s price. They simply own the underlying asset itself.
Spot ether ETFs began trading July 23, 2024, after receiving approval from the Securities and Exchange Commission (SEC).
How Does a Spot Ethereum ETF Work?
Through their unique creation and redemption process, ETFs enable investors to trade shares of a basket of securities or a target asset, in this case ether, on exchanges throughout the trading day, similar to a stock.
Investors who have avoided trading ether because of technical complexity and regulatory issues can trade the ETFs.
Spot Ethereum ETF List: Tickers and Expense Ratios
Ticker | Fund | Expense Ratio (Post Waiver)* |
ETH | Grayscale Ethereum Mini Trust | 0.00% (0.15%) |
EZET | Franklin Ethereum ETF | 0.00% (0.19%) |
ETHV | VanEck Ethereum ETF | 0.00% (0.20%) |
ETHW | Bitwise Ethereum ETF | 0.00% (0.20%) |
CETH | 21Shares Core Ethereum ETF | 0.00% (0.21%) |
FETH | Fidelity Ethereum Fund | 0.00% (0.25%) |
ETHA | iShares Ethereum Trust | 0.12% (0.25%) |
QETH | Invesco Galaxy Ethereum ETF | 0.25% (0.25%) |
ETHE | Grayscale Ethereum Trust* | 2.50% (2.50%) |
*ETHE is a conversion. Spot Ethereum ETF fee waivers last for a certain period of time, such as 6-12 months, or until a certain asset level, such as $0.5 to $1 billion, is reached. For more detail on expense ratios, read our article on spot Ethereum ETF fee waivers.
What Is Ethereum?
Ethereum is a decentralized blockchain platform that powers various applications beyond just cryptocurrency. Here's a breakdown of its technology and key functionalities:
- Blockchain platform: Ethereum uses blockchain technology, a distributed public ledger that securely records transactions across a network of computers. This transparency and unchangeable nature are core strengths of blockchain technology.
- Smart contracts: Ethereum is best known for its smart contracts functionality. Smart contracts are self-executing contracts with pre-defined terms stored on the blockchain. Once programmed conditions are met, the smart contract automatically executes a task, removing the need for intermediaries and potentially reducing transaction costs.
- Ether (ETH): Ethereum has its own native cryptocurrency called ether (ETH). Ether functions as the fuel that powers transactions on the Ethereum network. Users pay fees in ETH to execute smart contracts and interact with applications built on Ethereum.
- Decentralized finance (DeFi): Ethereum is a popular platform for decentralized finance (DeFi) applications. DeFi offers financial instruments like lending, borrowing, and asset trading without relying on traditional financial institutions.
- Non-fungible tokens (NFTs): Ethereum is a major platform for non-fungible tokens (NFTs), which are unique digital assets representing ownership of digital items like artwork, collectibles, or in-game items.
- Other uses: The Ethereum blockchain also underpins various other applications, including supply chain management, identity verification, and voting systems.
Key Points to Know About Ethereum
- Decentralized: Ethereum operates on a decentralized network, meaning no single entity controls it.
- Open-source: The Ethereum network and its technology are open-source, allowing anyone to contribute to its development.
- Programmable: The ability to run smart contracts makes Ethereum a versatile platform for various applications.
- Evolving Ecosystem: The Ethereum ecosystem is constantly evolving, with new applications and functionalities emerging all the time.
Spot Ethereum vs Futures ETFs
The key difference between spot and futures-based Ethereum ETFs lies in how they track the ether ‘s price:
Spot ETF
A spot Ethereum ETF owns the ether directly, similar to how a gold ETF holds physical gold bars. A spot Ethereum ETF is potentially more volatile due to the inherent volatility of cryptocurrencies but may offer lower fees and better track the price of ether in the long run.
Futures-based ETF
A futures-based Ethereum ETF doesn't own the cryptocurrency directly. Instead, it uses futures contracts to track ether’s price. A futures contract is an agreement to buy or sell a security at a specific price on a predetermined future date.
Futures-based Ethereum ETFs are generally considered less volatile than spot ETFs due to the way futures contracts work but may have tracking errors and higher fees due to the costs associated with futures contracts.
Bitcoin vs Ethereum
Bitcoin and Ethereum are the world’s largest cryptocurrencies by market capitalization, but they have distinct purposes:
Bitcoin
Bitcoin is primarily a digital currency designed for fast, secure peer-to-peer transactions. Think of it as digital gold—a store of value and a potential hedge against inflation. Compared to Ethereum, Bitcoin has limited transaction processing capacity compared to Ethereum and no support for smart contracts.
Ethereum
Ethereum is a decentralized platform that powers various applications beyond just currency. Think of it as a programmable blockchain with its own cryptocurrency (ether). Ethereum offers faster transaction processing capabilities than Bitcoin and supports smart contracts, enabling development of decentralized applications (dApps) for finance (DeFi), NFTs and more.
Is an Ethereum Spot ETF a Good Investment?
Proponents of spot Ethereum ETFs argue they offer investors a more convenient and regulated way to gain exposure to ether compared to buying it directly on cryptocurrency exchanges. They might also provide some diversification benefits for a traditional investment portfolio.
As is the case with any cryptocurrency investment, spot Ethereum ETFs involve volatility and risk. The price of ether can fluctuate widely, as they are considered a speculative asset and SEC approval does not mean the cryptocurrency is safer than before its approval