Why Ethereum Jumped More Than 4% Today
Key Points
Bitcoin reached a new all-time high of $125,500 amid government shutdown concerns, and Ethereum followed along.
Grayscale enabled staking on its Ethereum ETFs, offering roughly 3% annual returns to investors.
Other Ethereum ETF providers will likely follow Grayscale's lead someday and enable staking.
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The Ethereum (CRYPTO: ETH) cryptocurrency is having a great day today. The second-largest name in crypto (and leading smart contracts platform) is up by 4.3% in 24 hours as of 1:30 p.m. ET. The move is part of a broad uptrend in the crypto market, but Ethereum also brought a couple of unique catalysts to the party.
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Bitcoin hits new highs and two Ethereum ETFs add dividend-like payouts
First, I must note that Bitcoin just reached a new all-time high, hovering around the $125,500 mark. Bitcoin often sets the general mood of the cryptocurrency market, and this is no exception. The ongoing government shutdown appears to fuel the Bitcoin rally, along with widespread concern over soaring global debt balances. Many investors flock to safer investments in times like these and Bitcoin is starting to look like one of those. I know, times are changing.
Ethereum doesn't play the safe-haven role, and it tends to be more volatile than Bitcoin. However, the two digital currencies often ride each others' coattails, even when the underlying market-mover fuel doesn't apply to both. So there's one important reason for Ethereum's jump today.
But, like I said, there's another booster behind Ethereum's jump today. Two Ethereum-based exchange-traded funds (ETFs) from the Grayscale firm just enabled dividend-like staking. A 3% price increase looks like a reasonable reward for this industry-first move.
Staking rewards make Grayscale's fees easier to swallow
Grayscale's staking adds an annual dividend-style return of roughly 3%, you see. It also puts Grayscale's Ethereum holdings to work, helping the blockchain network validate transactions and provide stronger data security.
Today, the Grayscale Ethereum Trust's staking-based rewards cancel out the fund's 2.5% fee ratio -- the highest fees among the eight spot Ethereum ETFs on the market. The Grayscale Ethereum Mini Trust ETF already comes with a much lower fee ratio (0.15%), making it a tempting income investment right now. In the long run, I expect other funds to follow suit and enable staking. It just makes sense.
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Anders Bylund has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
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