Bitcoin ETF vs. Ethereum ETF: What’s the Difference?

Bitcoin ETF and Ethereum ETF are financial products that allow investors to gain exposure to BTC and ETH, respectively, without needing to hold cryptocurrencies ￰0￱ debut of ￰1￱ price ETFs was a big deal for the cryptocurrency market at large, so much so that it incited a major bull run in ￰2￱ back today, the bets on crypto ETFs were ￰3￱ and ETH ETFs have become a big part of the crypto market, controlling over $175 billion in assets in just one ￰4￱ this article, we will explain in detail why crypto ETFs are such a big deal and the difference between Bitcoin and Ethereum ETFs, among other ￰5￱ Bitcoin and Ethereum ETFs Are in the Spotlight The approval of Bitcoin and Ethereum ETFs was met with intense euphoria among crypto investors because it was believed they would essentially bridge crypto to Wall Street and bring about institutional and regulatory ￰6￱ ETFs Bridge Traditional Finance and Crypto First of all, an ETF or exchange-traded fund is not unique to the cryptocurrency ￰7￱ started from traditional finance and has been used for decades to invest in mutual funds and a basket of different assets.

Now, one of the roadblocks that decelerated the adoption of crypto by traditional investors is the complexity in managing ￰8￱ many investors know how or want to deal with the friction and risks of buying and storing BTC and other crypto ￰9￱ listing of crypto ETFs basically waived off these concerns, bringing down crypto to an instrument that most TradFi investors are already familiar with. 2024–2025 ETF Boom — Spot Approvals and Market Impact The success of spot Bitcoin and Ethereum ETFs saw a rush in the applications for other crypto assets, including SOL, XRP, DOGE, and other major ￰10￱ ￰11￱ and Exchange Commission (SEC) has even made it easier for more crypto assets to gain ETF approval, and much ￰12￱ September, the regulator approved generic listing standards for spot crypto ETFs, removing the need for lengthy case-by-case ￰13￱ implies more crypto assets could make it to Wall Street, which would translate to more capital inflows from institutions, financial advisors, and retail investors in ￰14￱ Demand for Regulated Crypto Exposure Spot ETFs widen the door to institutional demand for underlying crypto ￰15￱ stated earlier, financial institutions, wealth managers, hedge funds, and retail investors are more likely to engage with crypto through these ETFs because it is a familiar ￰16￱ are other benefits that come with it, such as ease of access and regulatory comfort attached to ￰17￱ that wouldn’t dabble in the crypto market directly are now doing so through ￰18￱ August, top universities Harvard and Brown revealed holding $116 million and $13 million in Bitcoin through ￰19￱ Is a Bitcoin ETF?

A Bitcoin ETF is simply an investment fund that tracks the value of Bitcoin. It’s traded on traditional stock exchanges, similar to how Tesla (TSLA), Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), and shares of other companies are ￰20￱ who buy into Bitcoin ETFs indirectly gain exposure to the largest crypto without needing to worry about securing the ￰21￱ that is handled by the fund issuer and the custodian firm designated for that particular ￰22￱ Bitcoin ETFs Work There are two categories of Bitcoin ETFs: spot and futures, and each works ￰23￱ Bitcoin ETFs are based on the real-time market price of ￰24￱ means the issuers like BlackRock, Fidelity, etc., would need to buy and hold the actual Bitcoin.

So, in this sense, owning a share of a spot Bitcoin ETF is similar to holding a fraction of BTC, without needing to deal with the actual ￰25￱ Bitcoin backing the shares is usually held with a regulated third-party custodian, not the fund issuer ￰26￱ instance, Coinbase and Anchorage are the custodians of BlackRock’s ￰27￱ there is high demand for the spot ETF shares on the stock exchange, the issuers like BlackRock buy more BTC to create new ￰28￱ when investors want to sell the ETF shares back to the fund, the issuer will need to sell a corresponding amount of BTC to redeem the ￰29￱ the other hand, a futures-based ETF is based on futures contracts that bet on the future price of ￰30￱ are usually traded on a regulated exchange like the Chicago Mercantile Exchange (CME).

Spot vs Futures Bitcoin ETFs Spot Bitcoin ETFs offer the closest exposure to the largest cryptocurrency than the futures-based products because they directly invest and track spot ￰31￱ the futures ETFs, there may be price deviations due to market ￰32￱ since issuers only hold futures contracts, there is usually no need for a ￰33￱ Bitcoin ETFs generally have a lower expense ratio, i. e., operating expenses, compared to futures ￰34￱ instance, BlackRock’s IBIT, the largest spot Bitcoin ETF, has a 0.25% expense ratio, whereas ProShares’s BITO, the largest futures Bitcoin ETF, charges 0.95%. Key Issuers of Spot Bitcoin ETFs Below are five of the biggest spot Bitcoin ETF issuers by assets under management, as of October ￰35￱ BlackRock is the largest spot Bitcoin ETF and also the world’s largest asset ￰36￱ firm’s iShares Bitcoin Trust (IBIT) currently has $64.3 billion in cumulative total net flow and more than $89 billion in ￰37￱ Fidelity Wise Origin Bitcoin Fund (FBTC) is currently the second-largest, with $12.6 billion in cumulative total net flow and $22.84 billion in ￰38￱ Grayscale Bitcoin Trust ETF (GBTC) comes third, with over $19 billion in ￰39￱ has a negative total net flow of -$24.6 ￰40￱ & 21Shares ARK 21Shares Bitcoin ETF (ARKB) takes the fourth place, with $2.11 billion in net flow and $4.75 billion in assets under ￰41￱ Bitwise Bitcoin ETF (BITB) is the fifth-largest spot Bitcoin ETF, with up to $2.39 billion in net flow and $4.59 billion in ￰42￱ Asset Exposure — BTC Holdings and Custody As mentioned earlier, spot Bitcoin ETFs are intended to closely reflect the price of the underlying ￰43￱ such, the issuers have to purchase or sell BTC from their treasury to issue or redeem ETF shares in response to ￰44￱ responsibility of managing or securing the holdings is usually outsourced to a third-party digital asset custodian.

Interestingly, Coinbase happens to be the primary custodian for most of the spot Bitcoin ETFs trading in the ￰45￱ ETF as “Digital Gold” Investment Vehicle Bitcoin ETFs brought about another channel for investors to buy into BTC, a store of value, similar to how people are also trading gold ￰46￱ “digital gold” narrative for Bitcoin is based on shared characteristics of scarcity with ￰47￱ supply of gold is limited by the amount that can be mined from the earth. Likewise, Bitcoin has a finite supply of 21 million ￰48￱ more than that number of BTC will ever ￰49￱ Is an Ethereum ETF? An Ethereum ETF tracks the value of Ether, the second-largest ￰50￱ shares of an Ethereum ETF gives investors indirect exposure to ￰51￱ Ethereum ETFs Differ from Bitcoin ETFs The first and obvious difference between Ethereum ETFs and Bitcoin ETFs is the underlying ￰52￱ former is based on BTC, while the latter is based on ￰53￱ is primarily perceived as a store of value due to its fixed supply.

ETH, meanwhile, functions as programmable money for smart contracts and DeFi. Also, BTC is based on the Proof-of-Work (PoW) consensus mechanism, while ETH is based on Proof-of-Stake (PoS). That means, Ethereum ETFs can passively earn investors staking rewards, but Bitcoin ETFs cannot. So, investors can only make a profit from capital appreciation with BTC ETFs, while ETH ETFs can offer both capital appreciation and staking ￰54￱ vs Futures Ethereum ETFs Ethereum spot and futures ETFs work the same way as their respective Bitcoin ￰55￱ only difference is in the underlying ￰56￱ Ethereum ETFs directly invest in the actual Ether, while the futures ETFs invest in Ether futures ￰57￱ the spot ETF shares gives you direct exposure to the price of ETH, while the futures allow you to speculate on the price.

Ethereum’s Unique Features — Smart Contracts and Staking Unlike Bitcoin, Ethereum is a Turing-complete blockchain, which means it can, in theory, execute any arbitrary computational instruction or ￰58￱ is primarily the reason Ethereum is able to support smart contracts, DeFi, and dApp protocols. However, Ethereum wasn’t initially designed to support ￰59￱ started out as a PoW blockchain, before finally transitioning to PoS after a major upgrade in 2022 dubbed “ The Merge .” That transition led to a chain split, birthing the current Ethereum network, which is secured by validators staking their coins, rather than ￰60￱ ETFs and Staking Yield — A Layer of Passive Income Since Ethereum now allows staking, it means Ethereum ETF issuers like Grayscale and VanEck can stake their holdings to earn staking ￰61￱ of October, the annualized staking yield for Ethereum was 2.87%.

The issuers can choose to distribute the yield to shareholders as a form of cash dividend or distribution, similar to how bond or stock ETFs distribute ￰62￱ way they can manage the staking reward is by reinvesting it into the ￰63￱ that happens, the funds are added back to holdings and so restaked to earn more returns. Also, putting back the reward to the funds could lead to a higher Net Asset Value (NAV) per share, which is good for ￰64￱ in October, Grayscale rolled out staking for its spot Ethereum ETPs, covering Grayscale Ethereum Trust ETF and Grayscale Ethereum Mini Trust ￰65￱ and Pending ETH ETF Issuers Here are the five biggest spot Ethereum issuers based on assets under management as of ￰66￱ BlackRock iShares Ethereum Trust ETF (ETHA) is currently the largest spot Ethereum ETF, with more than $1.2 billion in traded volume and $15.68 billion in ￰67￱ Grayscale Ethereum Trust ETF (ETHE) comes second with $117.9 million in traded volume and $4 billion in ￰68￱ Fidelity Ethereum Fund (FETH) comes third with $110.5 million in traded volume and $2.97 billion in ￰69￱ Bitwise Ethereum ETF (ETHW) is in fourth place with $22.4 million in traded volume and $473 million in ￰70￱ VanEck Ethereum ETF (ETHV) comes fifth with only $11 million in traded volume and $254 million in ￰71￱ ETF vs Ethereum ETF — Key Technical and Financial Differences Feature Bitcoin ETF Ethereum ETF Underlying Asset Bitcoin (BTC) Ether (ETH) Network Type Proof-of-Work (PoW) Proof-of-Stake (PoS) Utility Digital Store of Value Smart Contract Platform Reward Mechanism None Potential Staking Yield Volatility Profile Lower, more mature asset Higher, more speculative Adoption Base Institutional & macro investors Developer, DeFi, and Web3 participants Primary Narrative Inflation hedge/digital gold Tech growth/digital oil ETF Structure Spot & futures Spot & futures (with yield component) Performance and Market Behavior Bitcoin and Ether prices have grown significantly since the spot ETF ￰72￱ data shows these ETFs now account for billions in daily trading ￰73￱ ETF Trading Volume and Liquidity The listing of spot Bitcoin ETFs in the ￰74￱ has led to a substantial increase in overall Bitcoin trading volumes, especially concentrated around ￰75￱ ￰76￱ data from SoSoValue shows that more than $4 billion in volume was traded in a single day (October 24th), with $90.60 million ￰77￱ chart shows that the trading volume has been on a steady climb since the first batch was ￰78￱ precisely, in just 18 months after launching, spot Bitcoin ETFs crossed $1 trillion in cumulative trading ￰79￱ of October, the number sits at $1.14 ￰80￱ Spot Bitcoin ETF Volumes.) received as yield to investors under certain conditions from time to ￰81￱ of Grayscale’s ETH-based ETFs , i.

e., Grayscale Ethereum Mini Trust ETF (Ticker: ETH) and Grayscale Ethereum Trust ETF (Ticker: ETHE), uses a different reward ￰82￱ will pay distributions for those who like cash flow, while ETH will roll staking returns into NAV to compound the ￰83￱ issuers are likely to use either of these approaches to integrate staking rewards into their ￰84￱ Considerations and Custodial Complexity Staking has always been met with fierce resistance from the ￰85￱ issuers had to tell the regulator they wouldn’t participate in staking as part of the conditions for approval. “Neither the trust, nor the sponsor, nor the custodian, nor any other person associated with the trust will, directly or indirectly, engage in action where any portion of the trust’s ETH becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ETH or generate income or other earnings,” a 2024 Cboe filing reads.

However, more issuers began to push for it again after the SEC’s Division of Corporation Finance said in May that certain staking activities don’t constitute an offering of securities. Besides, ETFs require daily liquidity for investor redemptions, but staked ETH is subject to an unbonding ￰86￱ could add an extra layer of complexity in the management of the ￰87￱ on ETF Yield, Taxation, and Total Return Staking can boost the total return of Ethereum ETFs, but it can also pose a big challenge with respect to ￰88￱ that allow staking will return approximately 3% annualized yield to investors, which is an added benefit to the price growth of the potential increase in the price of ETH, compared to funds that don’t support ￰89￱ staking could be treated as an income-making activity, and that can affect how Ethereum ETFs are classified and ￰90￱ any point, the issuer, like Grayscale, gains “dominion and control” over the staking rewards; that is, once they are able to sell or transfer the rewards, they become ordinary income and are ￰91￱ Landscape and Compliance SEC Approval Timeline for BTC ETFs 2013: Winklevoss brothers filed the first-ever application for a spot Bitcoin ETF with the SEC. 2017: The SEC rejected the Winklevoss Bitcoin Trust proposal, citing concerns about market manipulation. 2018: The SEC rejected Winklevoss’s second application for similar reasons. 2021: The first Bitcoin futures ETF, ProShares Bitcoin Strategy ETF (BITO), began ￰92￱ 2021: Grayscale applied to convert its Bitcoin trust to a spot Bitcoin ETF. 2022: The SEC turned down Grayscale’s request and that of other issuers, including ￰93￱ 2022: Grayscale filed a lawsuit against the SEC for denying its ￰94￱ 2023: Cathie Wood’s ARK Investments filed for a spot Bitcoin ￰95￱ 2023: BlackRock followed suit, with other asset issuers like ￰96￱ 2023: ￰97￱ of Appeals for the ￰98￱ unanimously ruled in favor of Grayscale, stating the SEC’s denial was “arbitrary and capricious.” January 10, 2024: The SEC approved the applications to list and trade shares for 11 spot Bitcoin Exchange-Traded Products (ETPs).

January 11: The approved spot Bitcoin ETFs officially began trading on ￰99￱ and Transparency Requirements As we already know, traditional ETFs are heavily regulated, and so, crypto ETFs are not left ￰100￱ are subjected to similar ￰101￱ SEC requires that the underlying cryptocurrency of spot ETFs be held by a regulated and trusted custodian, which is why most of the issuers had to always state their designated primary custodian in their ￰102￱ transparency sake, the SEC also requires that crypto ETF issuers file annual audited financial statements on Form 10-K and quarterly financials on Form 10-Q, similar to a traditional public ￰103￱ Differences (U.

S., Canada, EU, Asia) The regulatory approaches to BTC and ETH ETFs vary across global financial hubs, especially the U. S., Canada, the EU, and ￰104￱ ￰105￱ were previously known to be hostile towards ￰106￱ wasn’t until after the Trump administration stepped in that policies eased up for crypto and stablecoins, with the ￰107￱ even announcing a national Bitcoin ￰108￱ happened to be more friendly to ￰109￱ was reportedly the first country to approve a spot Bitcoin ETF under a clear regulatory ￰110￱ EU has also begun to clear up regulatory hurdles for crypto, with the recent passing of the landmark Markets in Crypto Assets (MiCA) regulation, which provides a unified framework for crypto-asset markets across member ￰111￱ like Hong Kong also put Asia on the ￰112￱ Kong actually sped up approval of Bitcoin and Ether spot ETFs in a bid to beat the ￰113￱ it.

However, places like China continue to maintain a strict stance with bans on cryptocurrency trading and ￰114￱ ETF Fits Your Investment Strategy? Investors buy BTC and ETH as a store of value or passive income, and that also influences their choices regarding investing in Bitcoin and Ethereum ￰115￱ ETF — Conservative Store-of-Value Exposure Bitcoin is perceived as a store of value due to its fixed supply, which creates a sense of ￰116￱ based on the economics of scarcity, many people purchase Bitcoin and its related funds as a good long-term investment and even as a hedge against ￰117￱ ETF — Tech-Driven Growth and Yield Ether would appeal more to people who believe in Ethereum’s future as a decentralized computing platform and the concept of Web3 at ￰118￱ and its funds are better assets to hold, especially for investors looking to earn passively from their idle ￰119￱ Portfolio Approach — BTC/ETH Split Strategies A general rule of thumb with investing is never to put all your eggs in one ￰120￱ your portfolio would mean having both BTC and ETH ￰121￱ BTC and ETH have a high correlation, some analyses suggest that a 70/30 or 50/50 allocation might offer a better risk-adjusted return profile than an exclusive holding of ￰122￱ Considerations: Risk, Liquidity, Time Horizon Liquidity, risk, and time horizon, including fees, are some of the factors to consider when deciding which ETF to ￰123￱ is often less volatile than ETH.

Also, as we explained earlier, Bitcoin ETFs have more liquidity than Ethereum ￰124￱ fees can be higher or lower depending on the issuers and underlying ￰125￱ Future of Crypto ETFs Multi-Asset and Index Crypto ETFs As the crypto ETF market matures, we could begin to see more entrants of multi-asset and index-based crypto ￰126￱ funds offer investors exposure to a basket of cryptocurrencies, rather than a single ￰127￱ equivalent to the S&P ￰128￱ of DeFi and On-Chain Yield Products The integration of on-chain activities like staking and DeFi lending into the ETF structure is another key trend that could play out in the future as a way to enhance income features of the ￰129￱ that could be met with heavy ￰130￱ Entrants and Expanding Access Bitcoin and Ethereum ETFs are only a year into the U.

S. market. It’s not far-fetched to expect more institutional exposure to BTC and ETH through the funds, which means more capital flow and demand for the assets.