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ARK and 21Shares have unveiled their plans to launch an Exchange-Traded Fund (ETF) centered around Ethereum, the second-largest cryptocurrency by market capitalization. This innovative ETF will enable individuals to invest in Ethereum without the need to directly purchase and hold the digital asset, offering a more accessible and convenient investment option.
The ETF will closely track the price of Ethereum through the use of a specially designed index, providing investors with a simple and regulated way to gain exposure to the cryptocurrency. Shares of this ETF will be readily tradable on traditional stock exchanges, opening up cryptocurrency investment to a broader audience.
ETFs Gain Interest
This announcement comes at a time when interest in cryptocurrency ETFs is at an all-time high. Many companies have expressed their desire to create ETFs for both Bitcoin and Ethereum. Notably, experts believe that Ethereum ETFs have a strong chance of approval, similar to the success of Bitcoin ETFs in the past year.
According to a report by brokerage firm Bernstein, Ethereum, with its market structure closely paralleling that of Bitcoin, could be a prime candidate for an ETF, especially considering the active futures and spot markets on the Chicago Mercantile Exchange (CME), a crucial regulated platform for institutional investors.
A Unique Approach
What sets this Ethereum ETF apart is its unique approach to tracking the cryptocurrency’s price. Rather than actively trading Ethereum itself, it will rely on a reference rate known as the CME CF Ether-Dollar Reference Rate, reflecting Ethereum’s performance in U.S. dollars. This rate is administered by CF Benchmarks Ltd., enhancing the ETF’s pricing reliability and transparency. This stability in market structure makes Ethereum an attractive option for an ETF, mirroring the success of Bitcoin.
Furthermore, this Ethereum ETF will facilitate “in-kind” transactions in blocks of 5,000 shares. Investors will have the option to exchange their shares for the equivalent amount of Ethereum, providing a seamless way to access the cryptocurrency’s value without the need for direct management of cryptocurrency holdings.
In a parallel development, Grayscale Investments, a prominent player in the cryptocurrency space, is actively pursuing its Bitcoin Trust’s transformation into an ETF. A recent court ruling has favored this transition, and Grayscale is urging the U.S. Securities and Exchange Commission (SEC) to expedite its approval. The SEC has until mid-October to make a decision, which could have a significant impact on the timeline for Bitcoin ETF approvals.
Former SEC Chair Jay Clayton has expressed his belief that Bitcoin ETF approval is “inevitable.” However, the path for Ethereum remains uncertain, especially as the initial excitement surrounding Ethereum’s upgrades has subsided, leaving the cryptocurrency at a critical juncture.