Ethereum ETFs could gain a competitive edge with staking, analyst suggests

Crypto researcher Tom Wan believes that enabling staking for spot Ethereum exchange-traded funds (ETFs) could boost inflows and attract more investors to the digital assets products. The former 21Shares analyst shared this opinion on X (formerly Twitter), noting Ethereum ETFs have yet to live up to their true potential.

According to Wan, the assets under management (AUM) for ETH ETFs are only about 10% of what Bitcoin ETFs hold. This represents a significantly lower percentage compared to Ether’s market cap, which is 23% of Bitcoin’s, and the analyst believes enabling staking for the ETFs could fix that problem.

Wan noted that Ethereum ETFs need a selling point to make them attractive to investors, just as Bitcoin has its unique advantage as digital gold. He believes that staking could be a differentiator for Ethereum ETFs.

He said:

“One key factor holding ETH ETFs back from reaching their potential is the absence of staking. For institutional investors, who are likely new to crypto, Bitcoin is already a novel asset—Ethereum is even newer. To attract inflows, ETH ETFs need a clear differentiator that’s easy for investors to understand.”

With staking enabled, Wan believes Ethereum ETFs could better compete with spot Bitcoin ETFs for inflows because the promise of yields would attract some investors, particularly the retail. However, he acknowledged that institutional investors may not care so much about small yields of around 1%, but that could be meaningful for other investors.

Staking for ETH ETFs could eliminate management fees

Interestingly, enabling staking could also eliminate the need for ETF providers to charge management fees for investment products. Presently, the ETF issuers charge between 0.25% and 0.15% on their ETH ETFs, apart from Grayscale ETHE, which charges 2.5%. Wan believes staking could remove the need for these fees even if the issuers only staked 25% of their AUM.

He explained that the staking yield on Ethereum is currently around 3.2%, and even after removing all the costs associated with staking, all issuers except Grayscale with ETHE could cover their management fees and charge zero fees to their investors.

Wan noted that ETH ETFs with zero fees and staking enabled are already available in Europe. CoinShares ETHE has a 0% management fee and 1.25% staking reward, while Bitwise offers ET32 in the region with a 3.1% staking reward.

Although there are other staking-enabled ETFs in the region, such as VanEck’s VETH and 21Shares’s AETH, where the issuers still charge a management fee, he noted that their staking yield is still enough to cover the cost if they choose to charge nothing.

Meanwhile, Wan expects asset managers with staking expertise, such as 21Shares, VanEck, and Bitwise, to be the first to file for stalking-enabled ETFs once they are available. He also noted that ETH ETFs with lower AUM would benefit even more and could increase their market share.

He said:

“Given the liquidity risks and the current ~10-day withdrawal and exit queue for staking, issuers may initially use a lower staking rate, around 20-50%. This approach could benefit lower-AUM issuers, allowing them to be more aggressive with higher staking yields to attract investors.”

The researcher also projected that enabling staking for ETH ETFs could allow the Ethereum network to add between 550k and 1.3 million ETH to the total ETH staked. This will depend on the percentage of ETH that each issuer stakes.

Interest returning to Ethereum after Trump win

Meanwhile, ETH has been one of the biggest beneficiaries of Trump’s victory, with the asset seeing almost 10% gains in the last three days. After months of struggling to reach $3,000, ETH now looks poised to return to this level with its current rally that has seen it gain 7% in the past 24 hours and hit $2,878.

This rally reflects the positive sentiments surrounding the Ethereum Network, with previous concerns about how the Layer-2 networks are eating into the market share now dissipating. Many analysts now consider Ethereum to be Trump’s choice network, noting how he has actively used the network for his projects, and his latest crypto project is on Aave.

Industry experts also believe that Trump’s crypto-friendly administration will allow Ethereum to thrive, with the Securities Exchange Commission (SEC) now more likely to approve staking for Ethereum ETFs under Trump.