The Spot Ether ETF Race Heats Up

The Spot Ether ETF Race Heats Up

Asset managers have flooded the SEC with new filings.

sumit
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Senior ETF Analyst
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Reviewed by: Lisa Barr
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Edited by: Sean Allocca

The spot ether ETF race is on. Well, not yet, but it could kick off soon if rumors about the first ether futures ETFs are true. 

Sources close to the SEC say the agency may allow several ether futures ETFs to launch in October, according to a report from Bloomberg. If that’s true, they would be the first U.S.-listed exchange-traded funds tied to the world’s second most valuable cryptocurrency by market cap. 

Ether futures ETFs would be similar to the $1.1 billion ProShares Bitcoin Strategy ETF (BITO). They’d hold CME-traded ether futures contracts—but not ether directly. 

As we’ve seen with the whole spot bitcoin ETF saga, a lot of investors would prefer a spot ETF. Such a fund wouldn’t have to contend with potential “roll costs” from selling lower-priced futures contracts and replacing them with higher-priced contracts.  

They’d also potentially generate yield from staking ether, the practice of locking up the cryptocurrency in exchange for more ether.  

Spot ether ETFs would hold the private keys associated with ether on the ethereum blockchain through a custodian, a more direct form of ownership that many investors would prefer.  

Still Uncertain About Spot Ether ETFs 

Obviously, if the SEC doesn’t approve a spot bitcoin ETF, it almost certainly won’t approve a spot ether ETF either. But there have been growing hopes over the past few months that a spot bitcoin ETF could launch soon—either with the SEC’s blessing or following a potential court victory in Grayscale’s case against the regulator. 

A spot bitcoin ETF would open the door to a spot ether ETF; and a spot ether ETF is the natural next step after an ether futures ETF. 

So, the two ingredients for a spot ether ETF—an existing ether futures ETF and a spot bitcoin ETF—might be coming together—“Might” being the key word.  

While ether futures ETFs seem increasingly likely to launch, a spot bitcoin ETF remains a much more contentious issue. After all, Grayscale and the SEC are locked in a court battle over the issue. 

Market-based indicators are also giving mixed signals on the prospects of a spot bitcoin ETF. 

The Grayscale Bitcoin Trust (GBTC), the product at the heart of Grayscale’s lawsuit against the SEC, was last trading at a 26% discount to the value of its underlying assets.  

That’s significantly less than the 44% discount it had two months ago, but it’s only slightly below the 28.5% discount that it had on June 29, 2022—the day the SEC rejected GBTC’s conversion into an ETF and Grayscale launched its lawsuit against the regulator.  

Meanwhile, the Grayscale Ethereum Trust (ETHE) was last trading 38% below its NAV, a massive discount that suggests investors aren’t that confident about a spot ether ETF.  

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.