As an experienced analyst, I believe that Volatility Shares’ launch of its 2x Ether ETF (ETHU) marks a significant milestone in the crypto investment space, especially following the SEC’s approval of eight spot Ethereum ETF products last month. While ETHU is not the first product to gain approval, it represents an innovative way for investors to gain exposure to Ethereum through futures contracts and reverse purchase agreement transactions.
An investment manager named Volatility Shares has introduced a new ETF called ETHU, which aims to deliver twice the daily returns of Ethereum, as stated in its recently released prospectus.
Precursor to Spot Ethereum ETF
The SEC’s approval of eight Spot Ethereum ETFs marks the first release of a new investment tool: the Volatility Shares ETHU. As a pioneering Ethereum product, it provides an innovative avenue for investors looking to access the underlying asset.
In the Prospectus, the firm said the fund will not invest directly in Ethereum.
The Fund does not buy ether itself, but rather aims to gain profit from the price hikes in Ethereum futures contracts. Its objective is to deliver a return that is twice the value of ether’s performance.
The Volatility Shares 2x Ether ETF might engage in reverse purchase agreement transactions in addition to investing in other companies focusing on similar products, according to its disclosed plans. Moreover, the fund will adhere to its strategy by allocating 80% of its capital towards the underlying product.
Volatility Shares has previously introduced crypto-connected financial instruments for US investors. According to previous reports from Coingape, the company launched an Ethereum Futures ETF in the third quarter of 2023. This product is one of many Ethereum-related offerings that have contributed significantly to the ongoing consideration of spot Ethereum ETFs.
Will Futures ETF Faze Off?
If the Ethereum-backed Spot ETF receives approval, existing Ether ETFs could face substantial competition. A precedent was set when ProShares Futures ETF experienced a decrease in investments following the introduction of spot Bitcoin ETFs earlier this year.
The market share taken by Ethereum ETF products, such as those based on spot Ethereum, is still uncertain once the SEC grants S-1 approvals. However, competitors like Volatility Shares may face increased competition due to their sponsor fee being set at 0.94%. It’s important to mention that potential Ethereum ETF issuers, such as Franklin Templeton, have more competitive fees at just 0.19%.
As a researcher studying the Ethereum market, I believe these upcoming products have the potential to significantly increase the price of Ethereum in the future. Currently, Ethereum is valued at approximately $3,810.92 per coin, representing a 0.87% growth over the past 24 hours.
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2024-06-05 01:14