Fidelity Makes $4.7 Million Play on Ethereum ETF in SEC Filing

In a significant development within the asset management sector, Fidelity disclosed a substantial $4.7 million seed investment for its proposed spot Ethereum 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 one 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 culminated in total proceeds of $4,749,975 to 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.

Bloomberg Senior ETF Analyst Eric Balchunas noted that this is typical, as issuers often wait to disclose fees at the last minute or after competitors have revealed theirs. Balchunas also mentioned that Franklin is currently the only issuer to have disclosed a fee, set at 19 basis points.

The broader context of Ethereum ETFs saw the Securities and Exchange Commission (SEC) approve 19b-4 forms for eight Ethereum ETFs last month. However, issuers must still wait for their S-1 statements to become effective before trading can commence.

Eric Balchunas highlighted on social media that additional amendments to these S-1 filings are expected as the approval process continues.

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 expressed interest in purchasing up to $100 million of shares.

Similar to Fidelity, Bitwise has yet to disclose its fee structure, likely awaiting BlackRock’s fee announcement to make necessary adjustments.

Strategic Implications for Investment and Regulation

Adding 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 documents and proactive efforts to clear regulatory hurdles ahead of 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 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 presidential elections on November 5, indicating a strategically timed rollout that could influence broader market dynamics.

U.S. Senator Bill Hagerty, a member of the Senate Banking Committee, also entered the regulatory dialogue, urging the SEC to provide clearer regulations for the cryptocurrency industry.

Hagerty contended that without a proper regulatory framework, the cryptocurrency sector risks being driven out of the United States. In response, SEC Chairman Gary Gensler emphasized that the issue lies more in the enforcement of existing laws rather 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—advocated for the inclusion of Ethereum ETFs in investment portfolios. In a memo to clients, Hougan outlined three compelling reasons for investors to consider Ethereum alongside Bitcoin.

He pointed out the benefits of diversification, Ethereum’s broader utility beyond just being a form of money, and historical data supporting improved returns and risk-adjusted performance when Ethereum is added to traditional portfolios.

Hougan noted that most investors typically do not limit themselves to a single stock but rather invest in a basket of assets. Applying this strategy to cryptocurrency, he suggested an allocation that reflects Ethereum’s substantial market presence: about one-third the size of Bitcoin’s.

Given 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 sector is closely watching for further updates and 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.