There is reason to be excited about ethereum, which surpassed the $4,000 threshold in early March for the first time since December 2021.
If you want exposure to the cryptocurrency, the second-largest by market capitalization, you can invest through your brokerage account via ethereum ETFs.
To pinpoint the best ethereum ETFs of 2024, our team evaluated the current offerings in this emerging niche. We considered factors crucial for short-term and long-term investing, including expense ratios, assets under management, tax efficiency and bid-ask spread. A lower bid-ask spread indicates better liquidity and lower trading costs — and that’s better for you.
Best ethereum ETFs
Why trust our investing experts
Experienced fund analysts select our best fund selections based on a screening of several must-have metrics. Some of these metrics include but are not limited to assets under management, expense ratio, strategy, management, minimum investment requirements, turnover and fees. You can read more about our methodology below.
- 3,000+ ETFs screened.
- 3 levels of fact-checking.
- 3-step editorial review.
About picking the best ethereum ETFs
We looked at ETFs that provide ethereum exposure through futures. That’s because the Securities and Exchange Commission still needs to approve spot ethereum ETFs. Futures are derivatives that bet on the future price of ethereum as opposed to the current spot price.
Fund managers ARK Investment Management, 21Shares, Franklin Templeton and BlackRock have submitted prospectuses for spot ethereum ETFs, indicating a growing interest in providing direct exposure to ethereum.
Compare the best ethereum ETFs
Our ranking of the best ethereum ETFs was created by applying a screen of several “must-have” metrics:
- Spread. We set a limit for the 30-day median bid-ask spread at 0.40%. A lower bid-ask spread indicates better liquidity and lower trading costs.
- Expense ratio. We capped the acceptable expense ratio at 1%, net of waivers. This might seem high compared to traditional ETFs. But the complexity of ethereum futures, the security measures required to manage them and the nascent stage of the market justify the higher expense ratios.
- 30-day SEC yield. We looked for ETFs with a 30-day SEC yield of 4% or less to prioritize tax efficiency. In the context of ethereum ETFs, a lower yield is preferable to reduce your potential tax burden. Higher distributions can lead to unfavorable tax consequences, especially outside tax-advantaged accounts.
- AUM. All ETFs on this list must have accrued at least $5 million in AUM to reduce the risk of ETF closure.
- Provider. Given the specialized nature of cryptocurrency investments, we require that the ETFs come from providers known for their expertise in alternative ETFs or digital investments. This ensures that the ETF is managed by a firm with a track record and deep understanding of digital asset management.
An experienced ETF analyst selected the funds above, but they may not be right for your portfolio. Before purchasing any of these funds, do plenty of research to ensure they align with your financial goals and risk tolerance.
Why other funds didn’t make the cut
The selection pool for ethereum ETFs was relatively limited, prompting us to adjust our criteria while maintaining a rigorous selection process to ensure we presented the best options.
A key factor in our evaluation was the expense ratio, for which we set a strict ceiling of 1%, net of waivers. Recognizing the inherently higher costs associated with ethereum futures, we aimed to identify ETFs that offer competitive pricing.
This led to the exclusion of certain funds, including the Valkyrie Bitcoin and Ether Strategy ETF (BTF), which has an expense ratio of 1.24%.
We set a 30-day median bid-ask spread limit of 0.40% to accommodate the unique market dynamics of ethereum ETFs. This wider threshold than typically applied for equity ETFs reflects the need to balance liquidity concerns with the less liquid nature of ethereum futures holdings.
We also applied an AUM threshold of $5 million to ensure chosen ETFs were not at significant risk of closure, a lower standard than usual but necessary under the circumstances.
Lastly, we capped the maximum 30-day SEC yield at 4% to minimize tax inefficiencies. The frequent turnover of futures contracts within these ETFs can lead to capital gains distributions, which can be a drag on performance outside tax-advantaged accounts like Roth IRAs.
Final verdict
Our top pick for the best ethereum ETF is the ProShares Ether Strategy ETF, distinguished by its leading position with the highest AUM at $77 million. It also boasts a reasonable 0.12% bid-ask spread, underscoring its liquidity and the ease with which investors can enter and exit positions. Furthermore, it has the distinction of being the first U.S.-listed ethereum futures ETF, making it a pioneer in the space.
While the ProShares Ether Strategy ETF’s 0.95% expense ratio of is higher than the VanEck Ethereum Strategy ETF’s 0.66% expense ratio, the latter’s bid-ask spread of 0.33% elevates the total cost of ownership, particularly if you plan to buy and sell.
So, despite the slightly higher expense ratio, the ProShares Ether Strategy ETF offers a more cost-effective and liquid option for investors looking to gain exposure to ethereum through their brokerage accounts.
Buying ethereum ETFs
Buying ethereum ETFs follows the same straightforward process as purchasing a regular stock or ETF:
- Search the ETF. Start by searching for the ethereum ETF by its ticker symbol on your brokerage platform.
- Specify the order type. Decide whether you’re placing a market order (to buy at the current market price) or a limit order (to buy at a specific price or better).
- Set the price. If you’re using a limit order, specify the price at which you’re willing to buy the ETF.
- Set the quantity. Determine the number of shares you want to purchase.
- Complete the buy order: Review your order details for accuracy, and then submit your buy order to complete the transaction.
How to invest in ethereum ETFs
Investing in ethereum ETFs should be a careful process, aligning with your risk tolerance and objectives. Reflect on these questions:
- Am I willing to accept tracking errors? An ethereum ETF may not perfectly mirror the spot price of ethereum. This discrepancy, known as tracking error, can result from the use of futures contracts, expense ratios, and different trading times between the cryptocurrency and traditional markets.
- Where do I want to hold ethereum? If you prefer the convenience and regulatory framework of a brokerage account, ethereum ETFs are an ideal choice. Conversely, if you’re open to using a cryptocurrency exchange, prefer self-custody or are interested in staking, direct investment in spot ethereum might suit you better.
- Am I comfortable with the risk? Be aware that both ethereum ETFs and spot ethereum exhibit high volatility, potentially more so than traditional equities.
- Which ETF is best? Should you choose to invest in ethereum ETFs, compare options based on expense ratios, bid-ask spreads and AUM. This will help you identify the most cost-effective, liquid and well-established ETF that aligns with your investment strategy.
Frequently asked questions (FAQs)
As of March 18, the largest ethereum ETF is the ProShares Ether Strategy ETF (EETH), with $77 million in AUM.
Ethereum ETFs can be a suitable investment for those seeking indirect exposure to ethereum prices without the complexities of self-custody or navigating a cryptocurrency exchange. These ETFs can be held in standard brokerage accounts and traded like any other stock, offering a familiar and accessible way to invest indirectly in ethereum.
But there are downsides. One potential issue is a misalignment with the spot price of ethereum due to the use of futures contracts and the fact that ethereum trades 24/7, whereas these ETFs are limited to market hours.
Additionally, investors should be prepared for volatility associated with ethereum and the broader cryptocurrency market. High expense ratios compared to traditional ETFs also add to the cost of investment, which should be weighed against the potential benefits.
