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Spot Ethereum ETF Application
Grayscale Ethereum Mini Trust (ETH)
Grayscale Ethereum Trust (ETHE)
Bitwise Ethereum (ETHW)
VanEck Ethereum (ETHV)
21Shares Core Ethereum (CETH)
Invesco Galaxy Ethereum (QETH)
Fidelity Ethereum (FETH)
Franklin Ethereum (EZET)
iShares Ethereum Trust (ETHA)
Like the spot bitcoin ETF that launched in January, most ETFs are initially waiving fees, and in many cases will do so for up to a year.
By ETF launch standards, the Spot Bitcoin ETF has been a success, recently surpassing $17 billion in year-to-date net inflows since its debut.
For a new asset class, this is a big blow.
But Bitcoin, with a total asset value of $1.3 trillion, is roughly three times more valuable than Ethereum, with an asset value of roughly $414 billion, which may limit the initial appeal of an Ethereum ETF.
Bitcoin prices rose ahead of the launch of the Spot Bitcoin ETF. Ethereum has been a bit more volatile, rising 50% in 2024, but most of that gain came in the first three months of the year.
Still, for Ethereum enthusiasts, the main value of a Spot Ethereum ETF is that it’s the perfect vehicle to educate the public about Ethereum’s use cases, which go far beyond those offered by Bitcoin.
Ben Johnson, head of client solutions at Morningstar and a veteran of ETF research, noted that while Bitcoin is often touted as digital gold, “Ethereum is more like a pickaxe and shovel.”
“In the former case, it is finite and can be a store of value. The latter is not finite and is being used to build real-world applications,” he said.
Many investors are unimpressed with Bitcoin, mainly because it appears to have limited use cases. Bitcoin is a purely digital currency. The Ethereum platform, however, is different.
Both Bitcoin and Ethereum utilize blockchain, a decentralized, immutable ledger for recording transaction history, but they serve very different purposes.
Bitcoin uses the blockchain as a digital currency. Ethereum uses digital money like Bitcoin, but its blockchain has a broader range of purposes. (Ether is the cryptocurrency used on the Ethereum network, but in practice the terms Ethereum and Ether are often used interchangeably.)
Ethereum is a platform for building smart contracts, which are self-executing programs that enforce existing contracts or agreements. It’s as simple as “if I do this, you do that”. The key is that smart contracts are self-executing, run on the blockchain (the Ethereum network), and produce the same result every time they are executed. And smart contracts have a variety of uses:
The most common use is decentralized finance, or “DeFi,” which is just a fancy term for having financial services on the blockchain. In theory, almost any banking service can be performed. Users can send money, lend, borrow, open savings accounts, trade stocks, derivatives and other cryptocurrencies, and buy insurance. In theory, they could even trade real estate. Users can perform these functions using software known as “decentralized apps.”
Use cases go beyond financial services: users can play games, businesses can use it to track supply chains, it can even be used as a payments platform to settle stock trades.
Another use for Ethereum is as a stablecoin, which is a cryptocurrency whose value is pegged to another asset, usually the dollar. Because cryptocurrencies like Bitcoin and Ethereum are volatile, many DeFi applications use stablecoins for lending, borrowing, and trading.
What it promises is a trading network that could, in theory, be a much cheaper and faster way of doing business.
It remains to be seen whether this latest development will lead to an influx of even more cryptocurrency ETFs, or whether the U.S. Securities and Exchange Commission will find a way to stop the potential tsunami.
Applicants for other cryptocurrency ETFs will have to prove that the underlying markets are not subject to manipulation, a key requirement for approval of these funds.
But a lot may depend on the political situation.
Until now, the SEC has mandated that for commodities, there must be a regulated futures market to trade alongside assets. Currently, this only exists for Bitcoin and Ethereum, so it will take time to develop futures markets for other crypto products.
“Under the current regime in Washington, that’s not going to change,” said Matt Hogan, chief investment officer at Bitwise Inc. “But if the regime in Washington changes, that could change.”
Either way, expect a lot of trading. “These new ETH ETFs will likely be traded in large volumes,” Morningstar’s Johnson told me. “I think once options become available on these ETFs, it’s going to really accelerate everything. These ETFs essentially become a whole new part of the crypto casino.”
For now, the main focus is on promoting Ethereum as a new trading platform, with Ethereum advocates making a strong case that the platform is essentially a tech investment.
“Many investors look at Bitcoin as digital gold, as a store of value, while investors look at Ethereum as a technology tool,” Bitwise CEO Hunter Horsley said on CNBC last night.
Note: VanEck CEO Jan van Eck, Morningstar’s Ben Johnson, and David Mann, head of ETF products and capital markets at Franklin Templeton, will appear on ETF Edge on Tuesday, July 23rd at 1:10pm ET. Visit ETFEdge.cnbc.com.
