Staking could significantly increase the flow of investments into U.S.-traded Ethereum exchange-traded funds (ETFs), according to Tom Wan, a former crypto analyst at 21.co.
On November 7, Wan highlighted that staking could help funds reduce management fees, increase the overall amount of Ethereum staked, and provide more substantial incentives to investors.
Wan noted that the lack of participation in Ethereum ETFs currently poses a barrier to their success. Staking could be a game changer, allowing these ETFs to compete more effectively with Bitcoin ETFs.
No US-based Ethereum ETF currently includes staking due to regulatory concerns. The United States Securities and Exchange Commission (SEC) has raised the question of whether staking services could be considered unregistered securities offerings.
However, several analysts have indicated that ETFs would benefit significantly from staking, a process that allows investors to lock up their Ethereum to validate transactions and earn rewards.
As of November 6, Ethereum ETFs have seen cumulative net outflows of more than $500 million, according to data from SoSoValue.
How Staking Would Transform Ethereum ETFs
Wan explained that staking ETH in ETFs could reduce management fees from rates as high as 2.5%, seen in funds like Grayscale ETHE, to almost zero. Staking yields are typically around 3.2%, meaning ETF issuers could stake around 25% of their assets to cover operating costs without passing fees on to investors. This fee reduction would make Ether ETFs more attractive and affordable.
In Europe, companies such as CoinShares and Bitwise have already started offering staking rewards alongside reduced fees, demonstrating the viability of this approach. Wan pointed out that while other issuers like VanEck and 21Shares still charge management fees, their staking returns are often enough to cover expenses.
Wan estimated that staking within ETFs could add between 550,000 and 1.3 million ETH to the total staked supply, pushing it to new highs from the current rate of around 28.9%. . This increase in ETH staked could attract more investors and contribute to the stability of the Ethereum network.
Major ETF issuers like 21Shares, Bitwise, and VanEck are good at staking, giving them an advantage over companies with lower assets under management. Wan noted that smaller companies can offer higher staking returns to attract investors.
He declared:
“This approach could benefit issuers with lower assets under management, allowing them to be more aggressive with higher staking yields to attract investors.”
Staking via ETFs could also reshape Ethereum’s staking landscape by funneling more funds into centralized staking pools and exchanges, thereby inadvertently improving liquidity. Wan suggested ETF issuers explore liquid staking solutions, such as Lido’s stETH liquid staking token, to allow investors to withdraw funds more efficiently.
In conclusion, Wan said staking could help Ethereum ETFs realize their full potential and compete more effectively with Bitcoin ETFs. With management fees close to 0% and a yield of around 1%, Ether ETFs could become an attractive option for investors, offering a solid alternative in the crypto investment space.
