Ethereum ETFs’ struggles with outflows and price declines may be relieved if “staking,” the cryptocurrency’s validation mechanism which acts as a sort of yield device, were introduced, BlackRock Inc.’s (BLK) digital assets chief said this week.
Ethereum spot exchange-traded funds have badly lagged their Bitcoin counterparts since being introduced in June, six months after spot Bitcoin ETFs began trading. The two largest, the Grayscale Ethereum Trust ETF (ETHE) and the iShares Ethereum Trust (ETHA), both with about $2.5 billion in assets, have plummeted 43% over the past three months while the largest spot Bitcoin fund, the iShares Bitcoin Trust (IBIT) has dropped 13%.
Ethereum ETF investors’ inability to earn a staking yield may be contributing to their outflows and falling prices, BlackRock’s Robert Mitchnick said at the Digital Asset Summit on March 20 in New York, according to CNBC. Staking offers participants rewards in exchange for locking up their crypto for a period, and permitting that in the Ethereum ETF would stoke investor interest, he said.
“There’s no question it’s less perfect for ETH today without staking,” CNBC reported Mitchnick as saying. “A staking yield is a meaningful part of how you can generate investment return in this space, and all the [ether] ETFs at launch did not have staking.”
Mitchnick’s comments come as efforts are underway to persuade the Securities and Exchange Commission to permit staking in Ethereum ETFs.
Bitwise Asset Management and the New York Stock Exchange this week sought a rule change that would permit the Bitwise Ethereum Trust (ETHW) to offer staking rewards. Bitwise, which also manages the Bitwise Bitcoin ETF (BITB) among other crypto ETFs, in November bought London-based crypto firm Attestant to add staking services to its asset management services.
Approximately $527 million has been pulled from the two biggest Ethereum ETFs over the past month.
Source: etf.com data
With around $7 billion in eight funds, Ethereum ETFs are dwarfed by the approximately $95 billion, according to Bloomberg, in the dozen or so spot Bitcoin ETFs.
Bitcoin and Ethereum are the only cryptocurrencies permitted in spot ETFs, while other digital assets trade in futures funds.
