Ethereum (ETH) is the second most popular cryptocurrency and definitely the most widely used blockchain network in the world. Following the popularity of Bitcoin ETFs, Ethereum also saw a rise in demand for its own ETFs.
This led multiple financial institutions and investment companies to file for ETH ETFs in the US Securities and Exchanges Commission or SEC. Some popular names on this list are BlackRock, Grayscale, Bitwise, and many others.
Now, what does an ETH ETF mean, and how does it differ from the Ethereum cryptocurrency? Let’s have a closer look at it.
What Exactly is an ETH ETF?
Ethereum exchange-traded fund, or shortly ETH ETF, is a type of investment tool that allows users to invest and trade in Ethereum without actually purchasing the cryptocurrency. So, an ETH ETF acts like a giant digital wallet holding Ethereum. The price of this ETF is directly linked with the price of Ethereum cryptocurrency.
Users who invest in ETH ETFs have the privilege of skipping the trading process on crypto exchanges to own Ethereum. An ETF invests in Ethereum on behalf of these investors.
The phenomenon is the same as in stocks, where investors purchase shares of companies via the stock exchange without actually contacting the company. This means that investors can also buy or sell shares of ETH ETFs on various stock exchanges that have listed them.
Who Would Prefer Buying ETH ETFs Over ETH Tokens?
The primary target audience of such ETFs is institutional investors who want to save themselves from the hassle of visiting multiple crypto exchanges to get the best price to invest in ETH. ETFs allow them to use their existing brokerage accounts to get all the perks of these crypto assets, which includes securing profits as the prices increase.
Another factor that makes institutions invest in ETFs is the tedious process of following the ever-changing prices of cryptocurrencies, as ETFs do all this on their behalf. They also don’t need to make multiple crypto accounts or wallets, as they often can’t allocate this much time to KYC processes or learn about the complexities of these platforms.
What’s the Current State of ETH ETFs?
Unlike cryptocurrencies, ETFs first need to be approved by the SEC. This is because they’re listed like stocks on traditional exchanges, which are subject to regulatory approvals by the government, mainly the US.
In the same way, ETH ETFs need approval from the SEC to be offered to institutions or other investors in general. Many investment companies have already filed requests to the SEC for approval of their spot Ether ETFs, such as Fidelity, Grayscale, Ark/21Shares, VanEck, Galaxy, Franklin, etc.
Though none has been approved by far, the recent command by the SEC to these companies to refile their 19b-4 filings after an amendment has sparked speculation that the regulatory authority might finally approve spot ETH ETFs sometime this year.
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About CoinEx
Established in 2017, CoinEx is a global cryptocurrency exchange committed to making trading easier. The platform provides a range of services, including spot and margin trading, futures, swaps, automated market maker (AMM), and financial management services for over 5 million users across 200+ countries and regions. Founded with the initial intention of creating an equal and respectful cryptocurrency environment, CoinEx is dedicated to dismantling traditional finance barriers by offering easy-to-use products and services to make crypto trading accessible for everyone.
