SEC Approves 9 Ether Futures ETFs

Ethereum futures exchange-traded funds hit the market Monday after the SEC approved nine products simultaneously in an encouraging sign for cryptocurrency investors.  

Valkyrie Investments, VanEck Funds, Proshares, and Bitwise Asset Management all launched funds incorporating ether futures, while ProShares and Bitwise launched multiple versions. Two other firms, Volatility Shares and Kelly Strategic Management, were also approved to debut ether futures ETFs.  

While the agency approved ETFs that track bitcoin futures in 2021, the largest being the ProShares Bitcoin Strategy ETF (BITO), the regulatory body has thus far rejected and delayed all applications that seek to track spot bitcoin.  

“Gary Gensler is reacting to the criticism he has received over the past several months from all quarters,” said Ric Edelman, well known financial advisor and founder of the Digital Assets Council of Financial Professionals.

The approval comes as the Securities and Exchange Commission and its chairman, Gary Gensler, have come under increasing pressure to approve digital asset ETFs. 

“The court rejected the SEC after the Grayscale ruling; Congress has been highly critical. I believe that Gensler approved the ethereum futures ETFs as a way of demonstrating that he's being responsive to these and making a point that he isn't anti-crypto.”

The SEC asked a group of firms, including Grayscale, to withdraw their applications for an ether futures ETF last May. Yet in July, companies began rapidly refiling after the agency reportedly signaled it was ready to review the applications.

The SEC also likely approved the ETFs on a faster track than originally anticipated due to the potential of a looming government shutdown. 

“It went from zero to sixty right as we're reaching the 11th hour of negotiations for the shut down, so I would say it helped bring it through a little faster,” explained Morningstar ETF analyst Bryan Armour.  

The VanEck Ethereum Strategy ETF (EFUT) is the cheapest with an expense ratio of 0.66%. Both the Bitwise Ethereum Strategy ETF (AETH) and the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP) have a fee of 0.85%. ProShares's three funds, the Ether Strategy ETF (EETH), the Bitcoin & Ether Equal Weight Strategy (BETE), and the Bitcoin & Ether Market Cap Weight Strategy ETF (BETH), all have an expense ratio of 0.95%.

Demand for Ethereum ETFs 

While ether ETFs are a significant milestone for cryptocurrency investors, the funds haven't touched records set by the first bitcoin futures ETFs. By midday Monday, the assets had only collected nearly $2 million, while the Proshares Bitcoin Strategy ETF collected about $200 million in its first fifteen minutes on the market, according to Bloomberg analyst Eric Balchunas.  

“Bitcoin is more popular than ethereum,” said Armour. “The bitcoin futures ETF launch the first crypto ETF in the U.S., and also at the height of bitcoins price and so there was enthusiasm about it generally,” he added.  

Yet Matt Hougan, CIO at Bitwise Investments, argued ethereum should not be underestimated. 

“Bitcoin is the big dog crypto—it's got the largest market cap, it's got the most brand recognition,” he said. “But it doesn't have associated users, or revenue, or use cases that are as tangible to many people as ethereum,” said Hougan.  

The Future of Spot 

Grayscale Investments filed to convert its Grayscale Ethereum Trust into a spot ethereum exchange-traded fund on Oct. 2 as the news broke that ether futures ETFs began trading. 

Yet the race for the spot bitcoin and ether ETFs are likley a separate process in the eyes of the SEC. “I am not convinced that the SEC's approval of these products is necessarily good news about its handling of the spot Bitcoin ETF applications,” said Edelman.  

Contact Lucy Brewster at [email protected].