The Nasdaq stock exchange has filed an application with the Securities and Exchange Commission (SEC) to list an Ethereum exchange-traded fund (ETF) from Hashdex, a Brazilian asset manager. The ETF, called the Hashdex Nasdaq Ethereum ETF, aims to track the performance of ether, the native cryptocurrency of the Ethereum network, using both spot and futures contracts.
An Ethereum ETF is a type of investment fund that allows investors to gain exposure to the price movements of ether without having to buy, store, or manage the digital asset directly. Instead, investors can buy and sell shares of the ETF on a regulated stock exchange, just like any other stock or fund.
An Ethereum ETF can hold ether in two ways: spot or futures. Spot ether refers to the actual digital tokens that are bought and stored in a secure custody service. Futures ether refers to contracts that are traded on a regulated futures exchange, such as the Chicago Mercantile Exchange (CME), that allow investors to speculate on the future price of ether.
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According to the filing, Hashdex believes that holding a mix of spot and futures ether can provide several benefits for investors. First, it can reduce the reliance on the spot market, which may be subject to price manipulation or liquidity issues in unregulated exchanges. Second, it can enhance the tracking accuracy of the ETF, as futures contracts can help hedge against any deviations between the spot and reference prices of ether. Third, it can lower the operational costs and risks of the ETF, as futures contracts do not require physical delivery or storage of ether.
The filing also states that the ETF’s investment objective is to have its shares reflect the daily changes in the Nasdaq Ether Reference Price, which is calculated by Nasdaq using data from multiple sources, including spot and futures exchanges. The ETF intends to allocate its assets among spot ether, ether futures contracts traded on the CME, and cash and cash equivalents.
Hashdex’s ETF is not the first one to seek approval from the SEC for listing on Nasdaq. In fact, several other fund managers have already filed applications for similar products, such as VanEck, WisdomTree, and SkyBridge Capital. However, Hashdex’s ETF is unique in its approach of combining spot and futures holdings, as most other proposals either focus on one or the other.
So far, the SEC has not approved any spot-based crypto ETFs in the US, citing concerns over market manipulation, investor protection, and custody issues. However, it has approved several futures-based crypto ETFs, such as ProShares Bitcoin Strategy ETF and Valkyrie Bitcoin Strategy ETF, which only hold bitcoin futures contracts traded on the CME.
Hashdex’s ETF may be seen as a compromise between the two approaches, as it tries to balance the advantages and disadvantages of both spot and futures holdings. However, it remains unclear whether the SEC will be receptive to this hybrid model, or whether it will prefer a more clear-cut distinction between the two types of exposure.
If approved by the SEC, Hashdex’s ETF could be a positive development for Ethereum and its ecosystem. It could attract more institutional and retail investors to the second-largest cryptocurrency by market capitalization, increasing its liquidity, adoption, and innovation. It could also provide more legitimacy and credibility to Ethereum as a viable asset class, as it would be listed on one of the most prominent and respected stock exchanges in the world.
However, there are also some potential drawbacks of Hashdex’s ETF for Ethereum. It could increase the volatility and correlation of ether’s price with other assets, as it would be subject to market forces and sentiment that may not reflect its underlying fundamentals or value proposition. It could also introduce more regulatory scrutiny and oversight to Ethereum, as it would have to comply with various rules and standards imposed by the SEC and other authorities.
Ultimately, Hashdex’s ETF is an ambitious and innovative proposal that reflects the growing interest and demand for Ethereum among investors. Whether it will succeed or not depends largely on how the SEC evaluates its merits and risks, as well as how it fits into its broader vision and strategy for crypto regulation.