U.S. Investment Managers Launch First Ether Futures-Based ETFs

Three prominent U.S. investment managers, ProShares, VanEck, and Bitwise Asset Management, have introduced the world’s first futures-based exchange-traded funds (ETFs) tied to the value of ether, the second-largest cryptocurrency. These six new funds allow investors to gain exposure to ether through regulated exchange-traded products for the first time.

On the first day of trading, the six funds collectively generated a trading volume of $1.92 million, with the ProShares Ether Strategy ETF leading the way at $878,560. The launch of these futures-based products demonstrates a significant step forward for regulators and asset managers, according to Aisha Hunt, a principal at Kelley Hunt & Charles LLC, who advises clients in the ETF market. The fact that these ETFs are linked to futures contracts regulated by the Commodity Futures Trading Commission (CFTC) likely contributed to the Securities and Exchange Commission’s (SEC) receptiveness.

In contrast to spot bitcoin ETF applications, which have been denied by the SEC due to concerns about market manipulation, these ether futures-based ETFs have been approved. The six funds differ in strategy, structure, and cost. The ProShares Ether Strategy ETF, VanEck Ethereum Strategy, and Bitwise Ethereum Strategy ETF offer pure exposure to ether futures contracts traded on the Chicago Mercantile Exchange. The other three funds blend exposure to ether with bitcoin using various methodologies.

Fees are expected to be a significant differentiator among these funds, with the VanEck fund having the lowest expense ratio at 0.66%. This structure also allows investors to potentially benefit from a lower overall tax rate on profits from the ETF, as a portion can be distributed as dividends rather than capital gains.

More ETFs tied to ether futures are anticipated, with the Valkyrie Bitcoin and Ether Strategy set to begin trading on Tuesday. Valkyrie Funds recently completed the conversion of its bitcoin-only ETF into a dual cryptocurrency product, with the bitcoin-only ETF already accumulating a trading volume of $4.57 million.

It is important to note that the launch of an ether futures ETF should not be interpreted as a change in the SEC’s stance on spot bitcoin ETFs. According to Aisha Hunt, spot bitcoin ETFs will continue to face significant regulatory challenges.

Overall, the introduction of these ether futures-based ETFs marks a significant milestone in the cryptocurrency investment landscape, providing investors with new opportunities to participate in the growing digital asset market.