VanEck, one of the creators of crypto-based ETFs, may incentivize new buyers with zero fees once its Ethereum (ETH) fund launches. The approach is similar to the early days of Bitcoin (BTC) ETF trading when fee discounts were offered to onboard new investors.
Once it is given the green light to start drawing investments, the Ethereum ETF awaits significant inflows. To boost the initial takeoff, the VanEck ETF issuer announced its plans for a no-fee onboarding.
Read: Why BlackRock Ethereum ETF Is Pivotal to the Acceptance and Integration of Cryptocurrencies
The Ethereum ETF will bring a new layer of complexity, as it may involve transferring ETH and incurring additional expenses for gas fees. Currently, some Bitcoin ETFs still levy fees of 0.25%, though some BTC may be credited to their accounts without the need for a transfer. Most Bitcoin-based ETFs use Coinbase as their custodian, which credits their accounts with BTC based on demand.
Ethereum ETF will have to build its own coin supply procedure to acquire the actual digital assets. ETH is heavily used in decentralized finance and has strong incentives to hold for participation in decentralized finance.
VanEck to waive fees until selling $1.5B in ETH
The initial onboarding process for the ETF will be counted as a period of waiving the Sponsor Fee. The VanEck fund will have a 0.2% Sponsor Fee payable in cash or ETH to cover gas costs. This fee can be waived at the fund’s discretion and for limited periods.
According to the fund’s prospectus, the issuer will waive the Sponsor Fee for the first $1.5B of fund purchases, or a predetermined period after the ETF launch. If the sum is gathered before the period is over, a fee of 0.2% will apply.
When redeeming shares, the VanEck ETF will sell baskets of 25,000 shares at once.
The launch of the Ethereum ETF still has no set date, but speculations have been made for a possible start at the end of June. Others believe the fund may launch by July 2.
VanEck may expand to in-kind ETH delivery
The Ethereum Trust by VanEck is open to further regulatory expansion. One of its features would be in-kind delivery, or the possibility that buyers receive actual ETH. The details of this approach are to be determined, and it is uncertain if mainstream ETF buyers would have to build a self-hosted, non-custodial wallet.
The launch of an in-kind option still depends on SEC approval. Per the prospectus:
“The Trust may elect to permit Authorized Participants to also deliver or direct the delivery of ETH by third parties, or take delivery or direct the taking of delivery of ETH by third parties… ”
The fund will take precautions to guard its actual ETH. The still-unnamed custodian will carry $100M general insurance and $25M general insurance.
Is the Ethereum ETF more promising?
The volume of the Ethereum ETF is expected to be around 10-15% of the Bitcoin fund. However, the supply shock for ETH may be significant, due to the already deflationary network with up to 30% staked tokens.
On the purely crypto side, the launch of an ETF is expected to spark a new rally that will also affect altcoins. The need to purchase new ETH will also reveal the true scarcity of the supply chain.
Also read: ARK Invest Backs Out of Spot Ethereum ETF With 21Shares
Many ETH owners also choose to stake their tokens and trade with stETH and LST instead. Freely available ETH on exchanges is also relatively scarce. Exchange reserves have fallen to around 17M ETH, the lowest level since 2021.
Despite the almost imminent launch of an ETF, the market price of ETH stalled just under $3,400 after the most recent market crash. ETH traded at $3,377.48 on subdued volumes of $11.8B in 24 hours.
The launch of the ETF may also end the stagnant market of the past few weeks, and it will be considered a bullish event. Common price predictions envision ETH going to $6,000 when the first funds launch and an even higher climb after inflows increase.
Cryptopolitan reporting by Hristina Vasileva
