The United States Securities and Exchange Commission (SEC) has finally cleared a long list of spot Ether exchange-traded funds (ETFs) that are set to begin trading today.

The move marks a positive step for the crypto market as mainstream investors will now have an alternative to pour money into this ‘altcoin’ and enrich their portfolios with the addition of the native token of the world’s largest smart contracts network.

In this article, we share extensive details about the new ETFs that will be introduced, their expense ratios, who will be managing them, and how investors can buy them.

Eight Issuers Get the SEC’s Nod to Launch a Spot ETH ETF

The SEC’s decision to approve spot Ether ETFs comes six months after the regulatory agency also gave the green light to spot Bitcoin (BTC) ETFs. This is a long-awaited moment and marks a pivotal shift in the regulator’s view of digital assets.

Eight funds are expected to hit the trading floor this morning. These ETFs will be listed on various exchanges including Nasdaq, Cboe BZX Funds, and NYSE Arca. The launch date was confirmed through exchange notices and communications from fund providers.

The following firms have received approval to launch spot Ether ETFs today:

  1. ARK & 21Shares
  2. BlackRock
  3. Fidelity
  4. Franklin Templeton
  5. Grayscale
  6. Hashdex
  7. Invesco
  8. VanEck

Many of these issuers also offer spot Bitcoin ETF products already and may leverage their experience in the cryptocurrency ETF space to offer Ether-linked products.

Unlike existing Ether ETFs that track futures contracts, these new funds will buy and hold Ether (ETH) directly and will act as a trust, meaning that they will hold the assets on behalf of the investors who bought shares issued by the fund.

This structure allows investors to gain exposure to the actual cryptocurrency without the need to directly purchase and store it themselves.

Four of the issuers listed have picked Coinbase to serve as custodian for their funds while VanEck chose Gemini. Meanwhile, others have appointed Fidelity for this task due to its experience in the crypto markets.

ETF issuers will likely compete to offer the most appealing fees to attract the most capital. Here’s a breakdown of the management fees for some of the funds:

  • Franklin Templeton:19%
  • VanEck:20%
  • 21Shares:21%
  • Invesco:25%
  • BlackRock’s iShares:25% (to be reduced to 0.12% when assets reach $2.5 billion).
  • Grayscale:5% for its flagship ETHE product, 0.15% for its “mini fund”.
  • Bitwise: No fee for six months or until it reaches $500 million in assets.

Expense ratios are expressed as a percentage of the fund’s assets under management (AUM). These fees cover the operations expenditures associated with running the fund along with transaction and custody costs.

No Staking, Says the SEC

Some of the issuers proposed the possibility of staking their ETH to generate additional revenue for the fund. However, the SEC rejected this proposal as they believed that this practice would violate securities laws. Hence, the staking component had to be removed from the issuers’ S-1 filings.

According to estimates from the Head of Strategy of the crypto exchange Kraken, Thomas Perfumo, spot ETH ETFs could attract nearly $1 billion per month in capital inflows during their first six months. Meanwhile, Citigroup made a similar forecast, predicting that these new ETH-linked products could amass over $5 billion in capital from investors during a similar period.

“I think these ETF products significantly validate the legitimacy of crypto as an asset class,” Perfumo told The Block.

On the other hand, Bitwise, one of the companies that is launching a spot ETH ETF, believes that the figure could be much higher. According to its forecasts, these products could bring in at least $15 billion in assets from investors.

Most of the analysts surveyed believe that ETH-linked products will only attract a percentage ranging from 30% to 35% of what Bitcoin spot ETFs brought in as the latter digital asset continues to dominate the market in terms of both market cap and acceptance within the investment community.

The spot Bitcoin ETFs launched in January 2024 have been highly successful, amassing nearly $60 billion in market cap to date. To date, 11 issuers have managed to get their Bitcoin spot ETFs approved by the SEC.

How Will Spot ETH ETFs Impact the Price of Ethereum (ETH)?

The price of Ether could be heavily influenced by the approval of these spot ETFs, especially if it attracts anywhere near as much volume as the Bitcoin spot ETFs. As a reference, the price of Bitcoin (BTC) has surged by over 40% since these products were approved in early January this year.

Even though analysts caution that the impact may be milder for Ether, some forecasts are already pointing to double-digit increases in the short term and triple-digit gains in the long run.

Matthew Sigel from VanEck suggested a price target of $22,000 for Ethereum by 2030. The crypto expert shared his views on the digital asset in a blog titled “ETH 2030 Price Target and Optimal Portfolio Allocations” published in early June.

He commented: “We estimate ETH’s price to hit $22k by 2030 in our updated base case scenario and explore optimal BTC and ETH allocations in both traditional 60/40 and crypto-only portfolios.”

He compared Ethereum to certain tech companies like Roblox and Etsy and claimed that the network’s revenues per user are much higher than any of these peers at $172.

“We categorize Ethereum as a platform business similar to the Apple App Store or Google Play. However, Ethereum has a substantial edge over web2 platforms because it offers the Ethereum users and Ethereum app business owners unique value propositions not available outside of crypto,” he added.

Other Industry experts and analysts who have expressed their views on the potential impact of spot Ether ETFs include:

  • Matt Hougan, Chief Investment Officer at Bitwise: “We’ve now fully entered the ETF era of crypto. Investors can now access more than 70% of the liquid crypto asset market through low-cost ETPs.”
  • Kyle DaCruz, head of digital assets at VanEck: “If Bitcoin is digital gold, then Ethereum is the open-source App Store and the gateway for exposure to the thousands of applications that will utilize blockchain technology.”
  • Analysts from Steno Research also predict more modest inflows compared to Bitcoin ETFs, citing Ethereum’s lack of a “first-mover advantage” and a less established narrative compared to Bitcoin’s “digital gold” status.

Ethereum is a Unique Network that Offers Real-World Applications

Unlike Bitcoin, which is often viewed as “digital gold” or a store of value, Ethereum is positioned as a technology play with broader applications.

Ben Johnson, Morningstar’s head of client solutions and an ETF research veteran, also noted that “Ethereum is more like picks and shovels” compared to Bitcoin’s role as the digital peer of gold.

The Ethereum platform offers a wide range of functionalities beyond simple digital currency:

  1. Smart Contracts: Self-executing programs that enforce pre-existing agreements.
  2. Decentralized Finance (DeFi): Enabling various financial services to function on the blockchain to perform activities like lending, borrowing, and trading.
  3. Decentralized Applications (dApps): Supporting a variety of applications beyond finance, including games and supply chain management.
  4. Stablecoins: Cryptocurrencies pegged to traditional assets that are often used in DeFi applications can live on the Ethereum blockchain and rely on smart contracts to automate its protocols.

These features position Ethereum as a more versatile blockchain infrastructure with potential applications across various industries.

Institutional Investors May Wait a Bit Before Piling In

Institutional interest in Bitcoin ETFs is already surging. Bitwise research points to at least 80% of the assets managed by BTC-linked spot ETFs have come from retail investors thus far. However, they note that ETH-linked products could attract different customers as the asset is tied to the tech industry and not just the digital asset market.

Meanwhile, the approval of a spot Ether ETF opens up the possibility that other similar products could be approved for other well-established assets like Solana (SOL). This could help legitimize the entire market and would give investors additional alternatives to diversify their investment portfolios without having to resort to pure-play crypto exchanges.

Institutional investors appear to be adopting a ‘wait and see’ approach to analyze the results that these ETFs produce in the short run by letting retail investors go into the trenches. If the funds operate without hassle, they will likely pour assets into these products progressively and move away from self-custody.

Is the SEC Softening its Stance on Crypto Products?

At a point when the SEC has been under fire for its anti-crypto policies and enforcement actions, the approval of these ETH-linked investment products is a step forward for the industry.

However, crypto experts argue that the regulatory environment still needs work as no comprehensive law that clarifies how agencies like FINRA, the SEC, and the CFTC should treat cryptocurrencies has passed Congress yet.

All things considered, the launch of spot Ether ETFs represents a significant milestone for the industry and a step forward in the integration of cryptocurrencies with traditional financial markets.

However, while these funds are expected to attract substantial investor interest, their impact may differ from that of Bitcoin ETFs due to Ethereum’s unique characteristics and market position.

As trading begins, market participants will closely watch inflows, price movements, and the market’s initial reactions. The success of these ETFs could potentially influence future regulatory decisions and pave the way for other cryptocurrency-linked investment products.