Regulation
Fidelity invests $4.7 million in Ethereum ETF in SEC filing
In a significant development in the asset management industry, Fidelity has disclosed a substantial seed investment of $4.7 million for its proposed Ethereum spot exchange-traded fund (ETF). This information was revealed in Fidelity’s latest amended regulatory filing.
The investment was made through FMR Capital, Inc., a subsidiary of Fidelity, which initially acquired a share at $40 in late May. This initial acquisition was followed by a larger purchase of 125,000 shares on June 4 at approximately $38 each.
Regulatory Progress and Market Dynamics
The transactions resulted in total proceeds of $4,749,975 for the Trust. According to the filing, these funds were then used to purchase 1,250 ether. Notably, the registration form did not mention any associated fees, reflecting a common practice among issuers of similar financial products.
Eric Balchunas, senior ETF analyst at Bloomberg, noted that this is typical because issuers often wait to disclose fees until the last minute or after their competitors have revealed theirs. Balchunas also mentioned that Franklin is currently the only issuer that has disclosed fees, set at 19 basis points.
The broader context of Ethereum ETFs has seen the Securities and Exchange Commission (SEC) approves Forms 19b-4 for eight Ethereum ETFs last month. However, issuers must still wait for their S-1 filings to become effective before they can begin trading.
Eric Balchunas highlighted on social media that additional changes to these S-1 filings are expected as the approval process continues.
Gary Gensler Suggests Approval of Ethereum ETFs Near Late Summer
Another asset manager, Bitwise, updated its registration form earlier this week. Bitwise disclosed a $2.5 million seed investment and revealed that Pantera Capital Management LP has expressed interest in purchasing shares of up to $100 million.
Similar to Fidelity, Bitwise has not yet disclosed its pricing structure, likely waiting for BlackRock’s fee announcement to make any necessary adjustments.
Strategic Implications for Investment and Regulation
To add to the anticipation, Bloomberg analysts Eric Balchunas and James Seyffart predicted that the Ethereum ETF could launch as early as July 2. Their optimism is based on minimal comments from SEC staff regarding the S-1 filings and proactive efforts to remove regulatory hurdles before then. on the holiday weekend.
Fox reporter Eleanor Terrett provided an exciting update on the regulatory front via social media. She shared that SEC Chairman Gary Gensler had hinted at the potential approval of Ethereum Spot ETF S-1 filings this summer, likely between June and September.
This timeline positions the launch just ahead of the November 5 presidential elections, indicating a strategically timed rollout that could influence broader market dynamics.
U.S. Senator Bill Hagerty, a member of the Senate Banking Committee, also participated in the regulatory dialogue, urging the SEC to provide clearer regulations for the cryptocurrency industry.
Hagerty argued that without a proper regulatory framework, the cryptocurrency industry risks being driven out of the United States. In response, SEC Chairman Gary Gensler emphasized that the problem lies more in enforcement of existing laws than a lack of regulatory clarity.
Investment recommendations and future outlook
As the potential launch date for Ethereum ETFs approaches, Matt Hougan, chief investment officer at Bitwise, which launched its own spot Bitcoin ETF earlier this year, made the case for the inclusion of Ethereum ETFs in investment portfolios. In a note to clients, Hougan outlined three compelling reasons for investors to consider Ethereum alongside Bitcoin.
He highlighted the benefits of diversification, the broader utility of Ethereum beyond just being a form of money, and the historical data supporting improved returns and risk-adjusted performance when trading. ‘Ethereum is added to traditional wallets.
Hougan noted that most investors typically don’t limit themselves to a single security, but rather invest in a basket of assets. Applying this strategy to cryptocurrencies, he suggested an allocation that reflects Ethereum’s substantial presence in the market: about a third the size of Bitcoin.
Considering Ethereum’s $420 billion market cap compared to Bitcoin’s $1.3 trillion, a starting investment ratio of 75% Bitcoin to 25% Ethereum seems prudent.
As these developments unfold, the asset management industry is closely monitoring updates and subsequent regulatory approvals. The strategic investments and regulatory advancements mark a pivotal moment for Ethereum ETFs, with significant implications for investors and the broader cryptocurrency market.