Fidelity to Seed Ethereum ETF with $4.7 Million
Fidelity, the fourth-largest asset manager in the world, has announced that it will seed its upcoming Ethereum ETF with $4.7 million ahead of its official launch. This information comes from a recent regulatory filing. Fidelity's S-1 registration form for its "Fidelity Ethereum Fund" revealed, "Total proceeds to the Trust from the sale of the Seed Baskets were $4,749,975.00."
Fidelity Buys Its First Batch of Ethereum
On June 4, Fidelity used the proceeds to buy 1,250 ETH (Ethereum), worth $4.75 million at the time. The purchase was made by FMR Capital, an affiliate of Fidelity, and resulted in the asset manager securing 125,000 shares for $38 each. This process is known as seeding an ETF, where asset managers provide initial funds to offer liquidity for its first buyers and to show confidence in the fund. For example, when Fidelity launched its Bitcoin ETF in January, it seeded it with $20 million. Competitors such as BlackRock and Bitwise provided initial seeds worth $10 million and $200 million respectively.
Competition in the Market
Earlier this week, Bitwise disclosed in a registration statement that it had seeded its Ethereum ETF with $2.5 million, and that Pantera Capital Management might buy $100 million worth of shares. Shortly after Fidelity's announcement, BlackRock revealed that it would match its initial Bitcoin fund investment by seeding its Ethereum fund with $10 million.
Management Fees and Launch Dates
While seed numbers are being revealed, Franklin Templeton is one of the few applicants to disclose the management fee for their Ethereum fund. Their fee matches their Bitcoin product at 0.19%, making it the cheapest Bitcoin or Ethereum ETF so far. For comparison, VanEck’s fee is slightly higher at 0.2%. Experts believe other providers will reveal their fees as the launch date approaches. Eric Balchunas, a Bloomberg ETF analyst, estimates that these funds will go live around July 2. He remarked, “Everyone is likely waiting until the last minute or on BlackRock to disclose to see what they need to orbit around.”
Expected Performance of ETH ETFs
Analysts generally do not expect Ethereum ETFs to surpass Bitcoin ETFs in terms of inflow but predict that they will greatly outperform the average newly launched ETF product. Balchunas previously projected that the Ethereum ETFs would capture 20% of the Bitcoin ETFs' flows, which are currently at $14.6 billion since their launch in January. K33 Research published a report suggesting Ethereum ETFs might achieve 28% of the Bitcoin product's performance, amounting to $4 billion in five months. In March, Standard Chartered predicted that Ethereum ETFs could attract $45 billion of inflows within a year.
By understanding these developments and comparing them with previous ETF launches, it becomes easier to gauge the future performance and potential market impact of Fidelity's new Ethereum ETF.
