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In a watershed moment for the entire crypto sphere that signifies the nascent industry's growing heft, spot Ethereum ETFs have finally commenced trading on a number of American exchanges, allowing mom-and-pop investors a convenient avenue to gain exposure to Ethereum - the second most valuable crypto ecosystem after Bitcoin.
Back in May, the SEC granted an in-principal approval to a number of spot Ethereum ETFs, including the Grayscale Ethereum Trust, the Bitwise Ethereum ETF, the iShares Ethereum Trust, the VanEck Ethereum Trust, the ARK 21Shares Ethereum ETF, the Invesco Galaxy Ethereum ETF, the Fidelity Ethereum Fund, the Franklin Ethereum ETF.
Last week, the SEC formally approved these investment vehicles for trading. As is evident from the above snippet sourced from ZeroHedge, the base fees of these spot Ethereum ETFs range from 0.15 percent to 2.50 percent.
None of the approved ETFs currently allow for staking on the Ethereum network. As a refresher, under Ethereum's PoS transaction authentication mechanism, validators lock-up or stake specific Ether balances in specialized nodes to win the chance to authenticate a particular batch of transactions, thereby receiving the transaction fee as reward.
While the lack of staking will diminish the yields of spot Ethereum ETFs, this limitation appears to be a necessary opportunity cost to ensure sufficient liquidity for smooth fund operations, especially as Ethereum's standard exit queue limits the number of stakers who are allowed to exit on a given day. Nonetheless, almost all of these investment vehicles are currently searching for a feasible way to incorporate staking. As such, we would not be surprised if the SEC does allow these ETFs to stake a portion of their holdings on the Ethereum network a few months down the road.
Here's volume after first 15 minutes of trading. Total of $112m traded for the group (which is A TON vs a normal ETF launch but only about half of what bitcoin ETFs' volume pace was on DAY ONE, altho 50% would exceed expectations IMO). Also Bitwise outperforming early. pic.twitter.com/RoN9J1VoP1
— Eric Balchunas (@EricBalchunas) July 23, 2024
This brings us to the crux of the matter. Spot Ethereum ETFs attracted $112 million in volume during the first 15 minutes of trading. Critically, this is around half of the volume that spot Bitcoin ETFs collectively managed to attract within the first 15 minutes of their own debut.
ETH is the High Quality Liquid Asset (HQLA) of crypto
In anticipation of the ETH ETF launch, I’ve written a mini paper explaining what an HQLA is, why we need a natively digital one, and why ETH is the most likely candidate. My analysis compares it to BTC and SOL.
Here’s the…
— Omid Malekan 🧙🏽♂️ (@malekanoms) July 22, 2024
Meanwhile, spot Ethereum ETFs are expected to remain unconditional winners in the long run, particularly given the growing chorus around Ethereum as the crypto industry's benchmark High Quality Liquid Asset (HQLA) that is expected to underpin leverage and derivatives going forward.
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