The first half of 2021 concluded with significant momentum for major cryptocurrencies, with the two largest digital assets posting year-to-date gains of 18.81% and 185.75%, respectively.
Besides numerous institutions announcing allocations to assets like Bitcoin and Ethereum, another major development was the successful launch of the world’s first Bitcoin ETF in Canada. Many analysts believe the most significant event in the second half of the year may also be ETF-related—specifically, the potential approval of a Bitcoin ETF in the United States after eight consecutive years of rejections.
As discussed in previous analyses, three major Bitcoin ETF applications are set to reach final deadlines by December 2021, by which time the SEC must either approve or deny them. This decision is highly anticipated and could set the tone for cryptocurrency investment vehicles in the U.S.
While much attention has been focused on Bitcoin ETFs, Ethereum ETFs have also been advancing rapidly. Just two months after the debut of the first Bitcoin ETF on the Toronto Stock Exchange, Canadian regulators approved three Ethereum ETFs in a single day. According to OKLink data, there are now 12 Ethereum ETFs or similar securities products globally, collectively holding 1.3894 million ETH, valued at approximately $3.086 billion.
Many observers suggest that the approval of Bitcoin ETFs paved the way for Ethereum ETFs. If the SEC greenlights a Bitcoin ETF, an Ethereum ETF will likely follow soon. This expectation is why several firms awaiting Bitcoin ETF approvals have simultaneously filed for Ethereum ETFs. In related news, the Grayscale Ethereum Trust (ETHE) has returned to a positive premium after 25 consecutive days of trading at a discount.
Canadian Ethereum ETFs See Rapid Growth, Exceeding $450 Million in AUM
On February 18, the world’s first Bitcoin ETF began trading on the Toronto Stock Exchange. Purpose Investments, the firm behind this pioneering fund, gained a significant first-mover advantage, as noted by Bloomberg ETF expert James Seyffart.
Just two months later, on April 17, Canadian regulators approved three Ethereum ETFs simultaneously: Purpose Investments’ Ethereum ETF (ETHH), Evolve Capital Group’s Ethereum ETF (ETHR), and CI Global Asset Management’s Ethereum ETF (ETHX). All three began trading on April 20.
The management fees for these three ETFs vary slightly. CI Global charges 0.4%, Evolve charges 0.75%, and Purpose Investments charges 1%. On the first day of trading, Purpose’s Ethereum ETF attracted CAD 26.46 million (approx. USD 21.32 million), Evolve’s ETHR raised CAD 2.22 million (approx. USD 1.79 million), and CI Global’s ETHX gathered CAD 2.25 million (approx. USD 1.81 million).
Three days later, on April 23, a fourth Ethereum ETF began trading on the Toronto Stock Exchange. This fund, offered by Canadian digital asset manager 3iQ and investment firm CoinShares, provides both Canadian dollar (ETHQ) and U.S. dollar (ETHQ.U) denominated shares.
Data from OKLink’s “Chain Master” dashboard reveals the changing holdings of these four Ethereum ETFs. Purpose’s Ethereum ETF has seen continuous growth, rising from 19,590.32 ETH on April 30 to 59,837.29 ETH on June 30—a 205% increase in just two months.
Despite this growth in holdings, the fund’s total value peaked at $158 million on May 14 and has since declined to $127 million due to a drop in Ethereum’s price, representing a 20% decrease.
During the same period, the CI Galaxy Ethereum ETF added 25,874.14 ETH, a 162% increase. Its assets under management currently stand at $89.07 million. Like Purpose’s fund, CI Galaxy’s AUM peaked on May 14 at $130 million.
Evolve’s Ethereum ETF followed a similar trajectory, with holdings growing 196% from 4,997.26 ETH on April 30 to 14,794.69 ETH on June 30. Its value peaked at $53.56 million on May 17 and has since adjusted to $40.80 million.
Although it launched three days later than the first three, the 3iQ CoinShares Ethereum ETF has become the largest by assets. Its holdings surged from 4,104.21 ETH to 78,821.38 ETH between May 12 and May 14—a massive addition of 74,717.17 ETH. As of June 30, it holds 82,065.86 ETH, valued at approximately $175 million.
According to OKLink data, these four Ethereum ETFs collectively held 198,500 ETH as of July 1, with a total value of $457 million.
On the same date, the four Bitcoin ETFs listed in Canada held 47,421.32 BTC, worth $1.647 billion. The total scale of Ethereum ETFs is about 28% that of Bitcoin ETFs.
Canada’s rapid approval of eight regulated crypto asset ETFs in just two months has positioned it as a leader in North America and the world regarding cryptocurrency financial product innovation.
Three U.S. Firms Apply for Ethereum ETFs as Grayscale’s ETHE Premium Turns Positive
Meanwhile, in the United States, Bitcoin ETF applicants continue to await SEC review. Recognizing the symbiotic relationship between Bitcoin and Ethereum financial products—such as the launch of Ethereum futures following Bitcoin futures on the CME, and Canada’s approval of Ethereum ETFs shortly after Bitcoin ETFs—three firms applying for Bitcoin ETFs have also filed for Ethereum ETFs.
VanEck was the first to apply, submitting a preliminary prospectus for an Ethereum ETF to the SEC on May 8. The firm plans to offer this product in collaboration with the Cboe BZX exchange. VanEck’s Bitcoin ETF application is also first in line for SEC review, with a final decision required by November 14.
On May 27, WisdomTree applied to the SEC for an Ethereum ETF, also planning to list on the Cboe BZX exchange. Its filing did not initially specify a digital asset custodian.
Most recently, Anthony Scaramucci, founder of SkyBridge Capital, announced on July 1 the launch of a private Ethereum fund and expressed intentions to file for an Ethereum ETF.
The introduction of Ethereum ETFs carries several significant implications. First, it provides a compliant channel for institutional and retail investors to gain exposure, accelerating cryptocurrency regulatory acceptance. Second, it attracts traditional investors with benefits like lower unit cost, reduced trading barriers, manageable fees, and enhanced security. Third, the regulatory evaluation process helps filter high-quality assets and encourages the development of robust financial infrastructure. Fourth, Ethereum ETFs offer diversification benefits due to their low correlation with other asset classes. Finally, while the short-term price impact may be limited, ETFs open the door for traditional capital to enter the crypto space, potentially stimulating long-term demand for Ethereum.
Given that the U.S. is the world’s largest economy and one of the most active crypto trading markets, the approval of Bitcoin and Ethereum ETFs there would be a monumental step for the industry.
As referenced in earlier discussions on why the crypto market anticipates Bitcoin ETFs, consider the example of the SPDR Gold Trust (GLD). Since its launch on the NYSE in November 2004, this gold ETF—managed by State Street Global Advisors—embarked on a seven-year bull run.
Today, GLD ranks as the 221st largest asset globally by market capitalization, valued at $59.351 billion. In comparison, the four Canadian Bitcoin ETFs have a combined AUM of $1.647 billion, less than 2.78% of GLD’s size. The four Ethereum ETFs are even smaller, at just 0.77% of GLD’s value.
This disparity recalls the relationship between Bitcoin, Ethereum, and gold market caps in previous years. In March 2018, gold’s total market cap was $8.20 trillion, while Bitcoin and Ethereum were valued at $185.01 billion and $83.667 billion, representing 2.26% and 1.02% of gold’s value, respectively. By July 1, 2021, gold’s market cap reached $11.27 trillion, with Bitcoin and Ethereum at $627.68 billion and $248.027 billion—5.57% and 2.20% of gold’s market cap. At its peak, Bitcoin’s market cap even exceeded 10% of gold’s, indicating substantial growth potential for both Bitcoin and Ethereum ETFs.
Beyond ETFs, the Grayscale Ethereum Trust (ETHE) is another key indicator of institutional Ethereum adoption. ETHE currently holds 3.154 million ETH, with assets under management totaling $6.8 billion.
Data shows that ETHE entered a rapid accumulation phase starting February 1, growing from 2.9307 million ETH to 3.1775 million ETH by March 1—a gain of 246,800 ETH in one month. Based on its six-month lock-up period, a significant amount of ETH is expected to be unlocked in August or September. Recently, Grayscale has not added to its ETHE holdings, possibly due to persistent negative premiums or competitive pressure from newly launched ETFs.
After 25 days of trading at a discount, the Grayscale Ethereum Trust premium returned to positive territory, closing at 2.14% on June 30.
Despite recent market softness, cryptocurrency financial products continue to develop steadily. As the second half of the year unfolds, the market remains hopeful for more positive developments.
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Frequently Asked Questions
What is an Ethereum ETF?
An Ethereum ETF is an exchange-traded fund that tracks the price of Ethereum. It allows investors to gain exposure to ETH without directly purchasing or storing the cryptocurrency, providing a regulated and familiar investment vehicle.
Why are Ethereum ETFs significant?
They offer a compliant way for traditional investors to access Ethereum, potentially increasing institutional adoption and liquidity. They also simplify the investment process by eliminating the need for digital wallets or private keys.
How do Canadian Ethereum ETFs differ from U.S. proposals?
Canadian Ethereum ETFs are already approved and trading, while U.S. proposals are still under review by the SEC. The U.S. market is larger, so approval there could have a much greater impact on liquidity and overall adoption.
What does a positive premium mean for Grayscale’s ETHE?
A positive premium indicates that shares of the trust are trading above the net asset value of the underlying Ethereum. This often reflects high demand from investors who prefer a regulated product despite potential cost disadvantages.
How might Ethereum ETFs affect the price of ETH?
In the long term, ETFs could increase demand by making it easier for institutional and retail investors to buy ETH. However, short-term price impacts are less predictable and depend on overall market conditions.
What are the risks of investing in Ethereum ETFs?
Risks include regulatory changes, market volatility, management fees, and potential tracking errors between the ETF’s performance and the actual price of Ethereum.