What Are Ethereum Exchange-traded Funds?

An ETF, or exchange-traded fund, is an investment vehicle traded on stock exchanges that holds a collection of assets, such as stocks, bonds, commodities, or cryptocurrencies. It is designed to track the performance of a specific index or asset.

Specifically, an Ethereum ETF tracks the price of ether (ETH). This enables investors to gain exposure to the price movements of ETH without dealing with the complexities of managing crypto wallets and exchange accounts.

Investors can purchase shares of the Ethereum ETF through a familiar investment environment, like a brokerage account.

An Ethereum ETF can hold ETH directly or invest in futures contracts tied to its price.

A Spot Ethereum ETF holds actual ETH, while a Futures ETF invests in futures contracts based on ETH’s price. When an investor buys shares of a Spot Ethereum ETF, the fund purchases and holds ETH on their behalf. In contrast, a Futures ETF does not hold ETH directly. Instead, it invests in futures contracts, which are agreements to buy or sell ETH at a predetermined price in the future.

The value of a Spot Ethereum ETF reflects the current market price of ether, while the value of a Futures ETF is tied to the price predictions and expectations of ETH futures contracts. As a result, the performance of a Futures ETF may not always mirror the price movements of ETH as closely as a Spot ETF would.