Traders who want to buy and sell the cryptocurrency Ethereum can now do so using exchange-traded funds (ETFs). The best Ethereum ETFs make it easy to trade the second most popular cryptocurrency through a traditional broker rather than through more complicated cryptocurrency exchanges.
The Securities and Exchange Commission (SEC) approved a spot Ethereum ETF in May 2024, following the approval of a Bitcoin ETF in January. The Ethereum ETF began trading in July and allows traders to buy the cryptocurrency without having to store coins or use cryptocurrency exchanges with questionable security.
Here are some of the best Ethereum ETFs, including their performance and annual fees.
Top Ethereum ETFs
|
Fund (Ticker) |
Year-to-date performance |
Expense ratio |
|---|---|---|
|
iShares Ethereum Trust (ETHA) |
-32.3% |
0.12% |
|
Fidelity Ethereum ETF (FETH) |
-32.3% |
0%* |
|
Bitwise Ethereum ETF (ETHW) |
-32.4% |
0.20% |
|
VanEck Ethereum ETF (ETHV) |
-32.5% |
0.20% |
|
Franklin Ethereum ETF (EZET) |
-32.4% |
0%** |
|
Invesco Galaxy Ethereum ETF (QETH) |
-32.5% |
0.25% |
These spot Ethereum ETFs track the price of the cryptocurrency by the same percentage even if they trade at different fund prices. If Ethereum goes up 2 percent, these funds should go up as well. Thus, all of these ETFs have performed comparably since their approval.
So which fund is best for you? The ETF that offers the lowest expense ratio will be best, as they will perform roughly the same and hold the same underlying assets. The same goes for index funds that track major indexes such as the S&P 500. If the funds track the same index, the fund with the lowest cost will be the best choice.
Just like when new Bitcoin funds were offered, some of these new Ethereum funds are offering zero expense ratios for a limited period of time. While some fund managers may be looking to rapidly grow assets and investors, these fees will eventually add up once the initial low-fee period ends.
ETF fees are more competitive than trading Ethereum directly at most brokerages and cryptocurrency exchanges, so buying cryptocurrency through the fund is easier and cheaper, and you can trade with your existing broker without the hassle of a new cryptocurrency account.
Should you invest in an Ethereum ETF?
Of course, the arrival of an Ethereum ETF doesn't mean the popular cryptocurrency is worth buying, just that it's become easier and cheaper to buy, but for traders who already plan to bet on the digital currency, the fund offers a good way to do so while avoiding some of the security headaches surrounding cryptocurrency protection and security.
Anyone considering investing in Ethereum should consider what SEC Commissioner Gary Gensler said when approving a Bitcoin ETF in January, when he warned that “investors should remain cautious about the myriad risks associated with Bitcoin and any product whose value is tied to the cryptocurrency.”
Like Bitcoin, Ethereum has been highly volatile since its launch, making it an attractive trading vehicle for experienced traders. Ethereum has also performed well for traders who buy and hold shares. However, volatility can be tough on less experienced traders, who tend to buy high and sell low, as the volatility scares them away and weakens their resolve to hold on to the coin when it hits its lows.
Like most cryptocurrencies, Ethereum is not backed by any real assets or cash flows from its underlying organization. Its price is supported only by the emotions of traders who believe they can later sell it to another trader for more money. This type of strategy is what investment experts call the “greater fool theory of investing,” in which traders only profit by selling assets to others who are more optimistic than they are about the asset's prospects and price potential.
For these and other reasons, legendary investor Warren Buffett has distanced himself from cryptocurrencies, warning that Bitcoin and other cryptocurrencies are “probably rat poison squared.”
Where to buy the best Ethereum ETFs?
Ethereum ETFs can typically be purchased through any broker that allows clients to purchase stocks and funds on major exchanges in the U.S. The best brokers for stock trading allow investors to purchase available ETFs with no commission, allowing you to buy and sell positions at low cost.
Conclusion
The ability to trade spot Ethereum ETFs makes it easier and cheaper for traders to invest in the digital currency with their regular brokers, without needing a dedicated account with a cryptocurrency exchange. These funds could make Ethereum a more attractive option for traders, perhaps increasing the cryptocurrency's liquidity and acceptance as a legitimate investment.
Editorial Disclaimer: All investors are advised to conduct their own independent research into any investment strategy before making any investment decision, and please note that past performance of any investment product is no guarantee of future price appreciation.
