The Spot Ethereum ETF Race is Officially On

While the crypto community holds its breath waiting for a spot bitcoin ETF to be approved by the SEC, asset managers are now rushing to get a spot-based ethereum ETF approved as well.

Last week we saw two 19b-4 applications, kickstarting the race…

The first came from Cathie Wood’s Ark Invest pairing up with 21Shares with the latter acting as the sponsor. The fund would trade under the ticker "ARKE."

Then, on the same day, VanEck filed for their own spot-based ethereum ETF. Notably, VanEck was the first fund to file for a spot-based ether ETF back in May 2021. The difference, though, was that in 2021, VanEck filed an S-1 (as opposed to a 19b-4 application) which is only an indication of a firm’s intention to list a particular investment product on a national exchange.

With both groups filing 19b-4 applications last week, a 240-day clock has now been kickstarted for the SEC to hand down a decision.

We also wouldn’t be surprised if we were to see many more filings emerge (like this). This would be especially true for Grayscale and their Ethereum Trust (ETHE) which is currently trading at a 25% discount to NAV.

Speaking of ETHE, is it worth buying the fund to arbitrage an upcoming ETF, like investors did with GBTC?

For the answer to that question, we reached out to Boaz Weinstein who we covered two-weeks ago in regards to the GBTC arbitrage play. Here’s what he had to say:

Why a Spot-based Ethereum ETF Matters

A spot bitcoin ETF could revolutionize the crypto landscape by providing a more accessible and secure entry point for new investors. However, a spot-based ethereum ETF could be even more intriguing.

That’s because, while both ETF structures will charge investors a management fee to safely custody the cryptoassets, an ethereum-based ETF could actually provide yield in excess of what the management fees are.

Think about it, running an ethereum validator currently pays ~4.5%. If an ETF is able to accrue ether and stake it, they would be able to pass on a large percentage of that reward in the form of dividends to investors.

Now, the real question is whether or not the SEC would allow an ETF to stake ETH, but that’s an issue for another day. In the meantime, investors may soon be able to add BTC and now ETH to their retirement accounts.