Where to Buy the New Spot Ether ETFs in 2024

Following the success of spot bitcoin ETFs at the start of 2024, the U.S. Securities and Exchange Commission (SEC) approved nine spot ether ETFs for trading on July 23, 2024, giving everyday investors another opportunity to diversify into cryptocurrency. With the launch of these spot ETFs, investors can now take advantage of Ethereum’s volatility in a convenient and regulated manner without the hassle of setting up crypto wallets and accounts.

Buying spot ether ETFs is as easy as buying a stock, with these ETFs available for trading on traditional exchanges like Nasdaq, Cboe BZX, and NYSE Arca. Investors can buy these spot ETFs on many online brokerage platforms and robo-advisors that offer traditional assets. While Ethereum ETFs are already trading in the market, spot ether ETFs allow investors to directly invest in Ethereum, as opposed to future ether ETFs that hold contracts tied to ether’s value. Before investing in any spot ether ETF, you have to understand how it works and the risks involved.

Where to Buy Spot Ether ETFs

Spot ether ETFs are available for trading on many self-directed brokerages and robo-advisors. These ETFs might soon be integrated into IRAs and 401(k)s, similar to spot bitcoin ETFs. Although they are more suited to investors with higher-risk appetites because of their inherent volatility, they are generally more stable than their underlying cryptocurrencies. However, when picking a spot ether ETF, the first thing any investor should consider is the ETF’s net asset value. Exchange-traded funds (ETFs) with a lower net asset value could be more suitable for investors on a limited budget, but fees have to be taken into consideration.

Spot ether ETFs come with various management fees such as gross expense ratio, net expense ratio, and sometimes a sponsor fee. For example, BlackRock’s spot ether ETF product, the iShares Ethereum Trust ETF, requires investors to pay a sponsor fee of 0.25%, while Fidelity and Invesco’s spot ether ETFs do not have a sponsor fee. However, Invesco charges a separate 0.25% management fee on its Galaxy Ethereum ETF. Investors have to take all these fees into account before purchasing a spot ether ETF.

Compare Platforms for Investing in Spot Ether ETFs

Steps to Investing in Spot Ether ETFs

• Step 1: Open a brokerage account. Select a company that offers spot ether ETFs, research the costs and platform features to ensure it aligns with your style, and then open an online brokerage account, which will require you to provide basic personal information.
• Step 2: Fund the account. You can fund your account using various methods, but be sure to check the minimum deposit requirement first before making your transfer. Ensure that your initial deposit meets the minimum requirement and can cover any essential fees.
• Step 3: Research available ether ETFs. Currently, only nine SEC-approved spot ether ETFs are available for trading, so be sure to conduct thorough research on these options. When evaluating them, focus on ETFs with high trading volumes and high assets under management (AUM).
• Step 4: Select an ETF. Choose a spot ether ETF within your budget, taking advantage of issuers that have granted fee waivers if you meet certain criteria or buy an ETF before a particular time. For example, Fidelity is waiving all spot ether ETF fees until December 31, 2024.  
• Step 5: Place an order. As you would for stocks, place a buy order for your selected ether ETF. You can choose to buy the ETF immediately via a market order or set a limit order to get it at a different price later. 
• Step 6: Regularly monitor your investments. While your spot ether ETF is under professional management, it's still important to track its performance, observe ether charts, and stay informed about ether-related news, as these factors can significantly influence the volatility of your spot ether ETF.

Pros of Trading Spot Ether ETFs

Spot ether ETFs allow investors to take advantage of Ethereum’s growth and appeal without holding the underlying ether. 

Here are the benefits investors can enjoy from these ETFs:

• Ease of investment: Spot ether ETFs offer a simple and secure way for investors to invest in Ethereum, allowing them to buy or sell ether in a familiar environment without the hassle of setting up a crypto wallet.
• Portfolio diversification: Investors can buy crypto ETFs such as spot ether ETFs to diversify their portfolios.
• Early investment opportunity: Spot ether ETFs represent an early opportunity for investors to invest in Ethereum. Cryptocurrencies are still a relatively new asset class, and more mainstream adoption might fuel the growth of top cryptocurrencies like Ethereum. 
• Regulatory oversight: Spot ether ETFs are a more regulated asset class than traditional cryptocurrencies. This regulatory oversight offers spot ether ETF investors a higher level of protection compared to many crypto exchanges, where regulation is often less stringent.
• Tax implications: Spot ether ETFs will attract taxes, which differ in many countries. In the U.S., the IRS says investors pay taxes whether they own, sell, or transfer crypto between wallets. Tax gains on spot ether ETFs are lighter, as they are similar to taxes on traditional financial instruments like stocks.

Cons of Trading Spot Ether ETFs

• Regulatory controversy: The U.S. Securities and Exchange Commission (SEC) remains unclear about whether ether is a security or a commodity. In June 2024, the regulatory body dropped the case that insisted ether is a security. However, the SEC could decide to revisit this case, potentially negatively impacting the price of ether and, consequently, ether ETFs. A similar situation occurred with another cryptocurrency, Ripple, leading to a price downtrend that lasted almost four years.
• Lack of demand: If another asset replaces Ethereum’s utility in the future, demand for spot ether ETFs could be diminished. Cryptocurrencies like Solana and TON are already providing platforms similar to Ethereum’s, with some institutions hinting at the possible release of a Solana ETF. If more ETFs come up and Ethereum’s utility is no longer in high demand, the ETFs could nose-dive. Bitcoin is more likely a safer financial asset, and unlike Ethereum, it does not thrive on utility. 
• Expense ratios and fees: Investors have to pay various fees for buying and holding a spot ether ETF, including expenses and other fees. These fees could be expensive for smaller investments, significantly reducing any gains made. 
• Missed holder benefits: Buying an ether ETF does not give investors a chance to enjoy the benefits of directly holding ether, like extra money from staking and airdrops. 
• Custody risks: Spot ETF issuers hold the underlying ether in custody. If the ether is stolen or the custodian is hacked, the ETFs could crash. Investors should always determine the custodian of their issuer's ether and be sure the custodian is reputable and has structures in place to safeguard the ether. 

Alternatives to Spot Ether ETFs

Spot ether ETFs are a good way to invest in Ethereum directly, allowing anyone to gain a good entry point into cryptocurrencies without a lot of exposure. However, there are other ways investors can benefit from ether’s volatility.

• Direct buying: Directly buying Ethereum is the best way to gain direct exposure to ether and benefit from its volatility. Although it would involve setting up a crypto account with a cryptocurrency exchange and far more risk than spot ether ETFs, it allows investors to trade round the clock and gain benefits as an Ethereum holder. Spot ether ETFs might be unavailable in certain jurisdictions, but ether is available almost anywhere in the world.
• Futures ether ETFs: These ETFs work by holding an ether future contract without holding ether directly. They have higher management costs and greater price discrepancies than their spot counterparts. However, they offer a safer investment option, as investors do not have to worry about custody risks because there is no underlying asset. 
• Investing in blockchain-based stocks: These stocks are another indirect way of investing in ether. Popular companies like Coinbase have stocks that positively correlate with ether’s price, making them another easy alternative.
• Ethereum trusts and funds: These are investment vehicles that allow investors to invest in Ethereum indirectly. Unlike spot ether ETFs, they issue a fixed number of shares to investors and often have lower liquidity. The Grayscale Ethereum Trust is a popular example of these Ethereum trusts. 

The Bottom Line

Spot ether ETFs allow investors to track and gain exposure to ether with minimal risk. While Bitcoin is seen as digital gold, ether ETFs could experience more demand with increasing innovation. These ETFs are tradeable on several brokerages and robo-advisors, but be wary of exorbitant management fees. Also, these ETFs do not give holders benefits like staking rewards and crypto airdrops. Demand for these ETFs may dwindle with ether’s utility and regulatory battles, so investors have to be aware of these risks before buying them.

Frequently Asked Questions (FAQs)