Grayscale, VanEck, Others Join Ether ETF Race

Another five applications have been submitted to issue funds tracking ether, the second-largest cryptocurrency, after Volatility Shares last week appears to have set off a minor stampede with its filing last week. 

At least six firms have filed with the SEC for ether futures ETFs in the past few days as issuers rush to be first in the digital asset frenzy. 

After Volatility Shares applied July 28 for an ether futures exchange-traded fund, the firm was followed Aug. 1 by Grayscale Investments, Roundhill Financial Inc., VanEck Funds and Bitwise Asset Management Inc. filed with the Securities and Exchange Commission on Monday. ProShares also filed for both an ether futures ETF and an inverse “short” ETF.  

The applications come as investors await the SEC’s decision on recent spot bitcoin ETF filings from firms including BlackRock Inc. and Fidelity Investments. The proposed ether ETFs would track futures contracts, similar to SEC-approved bitcoin futures ETFs, as opposed to the spot bitcoin ETFs that actually own the cryptocurrency. The SEC has denied dozens of spot bitcoin applications over the past decade, citing security concerns. 

Ether’s Recent Price Decline 

Ether, the currency that operates on the ethereum blockchain platform, is down 1.5% in the past week, according to Coinbase.  

The SEC thus far hasn’t approved any ETF that tracks ether. It is unclear whether the agency considers them securities or something else, like commodities, according to etf.com Senior Analyst Sumit Roy. Until the SEC decides how to classify the assets, Roy said the agency is unlikely to approve an ETF giving investors exposure to ethereum. 

A slew of asset managers, including Grayscale and Bitwise, filed for ether ETFs in May before withdrawing after discussions with the agency.  

Often firms will file exploratory applications to open a discourse with the regulatory agency about a specific product. But “what remains a mystery is what changed” in terms of SEC attitudes that triggered a new wave of applications so quickly, according to Bradley Duke, founder and chief strategy officer at London-based ETC Group, which has issued exchange-traded products in Europe. 

The firms may be filing “just in case” applications, as they are wary of losing to first movers on any crypto ETF product, according to Morningstar ETF analyst Bryan Armour. The first approved ETF will likely get most investor inflows, like the ProShares Bitcoin Strategy ETF (BITO) did when it was first launched.  

“Being in that initial tranche is crucial to their success, which is why you see everyone piling in every time there is a new filing,” Armour explained.  

Spot Bitcoin Anticipation 

The applications come as anticipation for a spot bitcoin ETF reaches a boiling point. Many of the same firms, including Grayscale, VanEck and Bitwise, are awaiting an SEC decision on their spot bitcoin applications.  

“There are incredibly high stakes involved in crypto right now. It’s on top markets for traditional investors,” added Armour.  

Volatility Shares, which was the first firm to file in the new wave of ether futures ETFs applications, launched last month the first leveraged Volatility Shares 2x Bitcoin Strategy ETF (BITX).  

Even if this new wave of applications is not approved by the SEC, issuers are trying to tap into investor demand for digital asset products.  

“What does seem clear is that there seems to be a growing acceptance at the SEC that crypto is an inevitable part of America’s investment landscape,” Duke said in emailed comments. 

Contact Lucy Brewster at [email protected]