Grayscale’s Ether ETF Plan a Template for Rivals

Direxion, Bitwise, Roundhill follow fast with ethereum futures ETF filings.

Grayscale Investments’ plan to launch an exchange-traded fund that tracks futures in the second largest cryptocurrency has gained traction, as rivals quickly seek permission to start their own funds. 

Stamford, Connecticut-based Grayscale filed with the Securities and Exchange Commission on May 9 to launch the Grayscale Ethereum Futures ETF (ETHG), which will invest in Chicago Mercantile Exchange ether futures. Ether, the currency on the ethereum network, is second to bitcoin in market capitalization at $218 billion, according to CoinDesk. 

The next day, Direxion Shares, Roundhill Investments and Bitwise Asset Management all filed for permission to launch similar funds: the Direxion Ether Strategy ETF, the Roundhill Ether Strategy ETF and the Bitwise Ethereum Strategy ETF.  

The moves come as Grayscale, issuer of the $16.8 billion Grayscale Bitcoin Trust, is in the midst of suing the SEC for permission to launch the first spot bitcoin ETF. Bitcoin ETFs currently invest in bitcoin futures or companies involved in bitcoin technologies like mining. The SEC has said it’s not satisfied that potential bitcoin spot ETFs would be able to prevent fraud and other varieties of market manipulation. 

Still, with a decision in the Grayscale/SEC case looming, and with observers saying Grayscale may have boosted its chances of winning the case in a March court hearing, rivals may be preparing for crypto offerings in the event that the spot bitcoin ban is lifted. 

“Everyone is gearing up for a verdict on the Grayscale lawsuit against the SEC,” etf.com analyst Sumit Roy said, adding that the decision may come by the end of the third quarter. 

“If Grayscale wins, spot bitcoin ETFs will likely become a reality in the U.S. Not only that, depending on the nature of the victory, ETFs targeting other cryptocurrencies, particularly ether, might become viable,” he added. 

The SEC has denied the creation of a spot exchange-traded product for nearly a decade. 

Grayscale is also creating a trust to manage its ETFs and in a statement signaled that it sees future opportunities in crypto funds. 

“We are putting the necessary foundations in place so Grayscale can continue creating and managing regulated, future-forward products,” CEO Michael Sonnenshein said in the statement, which also announced it filed to issue the Grayscale Global Bitcoin Composite ETF and the Grayscale Privacy ETF. 

Ethereum has gained 50% so far this year, according to Yahoo Finance data. 

Contact Ron Day at [email protected] or follow him on Twitter at @RonDayETF