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Fidelity Amends Spot Ethereum ETF to Include Staking


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Fidelity Integrates Ethereum Staking in ETF Proposal

  • Fidelity has amended its spot Ethereum ETF proposal to include staking, aiming to generate additional income for investors.
  • The announcement led to a temporary surge in Lido DAO’s price, amidst a broader downturn in the cryptocurrency market.
  • The SEC’s upcoming decision on Ether ETFs, including Fidelity’s, is uncertain, with approval odds recently dropping.

Fidelity recently updated its application for a spot Ethereum exchange-traded fund (ETF), introducing an option for staking Ethereum to generate additional income for investors. The amendment, submitted to the United States Securities and Exchange Commission (SEC) on March 18, marks a noteworthy step in Fidelity’s approach to cryptocurrency investment.

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Fidelity’s Amendment: Ethereum Staking in ETF Proposal

The revised proposal outlines the potential for staking a portion of the ETF’s Ethereum assets. Fidelity did not specify the staking providers or the amount of assets it plans to stake. Staking, a process where investors lock up funds to support a blockchain network, has gained popularity as a way to earn rewards on holdings.

This update by Fidelity reflects a growing interest in staking among investment firms. Earlier, on February 8, Ark 21Shares announced similar plans for its proposed Ethereum fund. Franklin Templeton also joined the race to stake part of its Ethereum ETF for added income.

Immediate Market Reactions and Trends Among Investment Firms

The market response to Fidelity’s amendment was swift, particularly affecting Lido DAO, a major Ethereum staking provider. Its price momentarily jumped 6% from $2.48 to $2.56 according to TradingView, before settling back to $2.49. Despite this brief surge, Lido DAO’s price has decreased by 27% over the past week, mirroring a wider downturn in the Ethereum market.

Fidelity’s proposal joins a list of eight Ethereum ETF applications currently under SEC review. This list includes leading firms like BlackRock, ARK Invest, and Grayscale. The approval of these ETFs hinges on a decision by the SEC, expected by May 23. If the SEC doesn’t approve by this deadline, these firms must refile their applications.

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Awaiting the SEC’s Verdict: The Fate of Cryptocurrency ETFs

However, the outlook for approving a spot Ethereum ETF remains uncertain. Bloomberg ETF analyst Eric Balchunas noted a significant decrease in the likelihood of approval, dropping from 70% in January to 35%. He attributed this decline to the SEC’s silence towards fund issuers and political opposition to SEC Chair Gary Gensler.

The decision to include staking in its Ethereum ETF indicates Fidelity’s commitment to exploring new avenues in cryptocurrency investments. The upcoming decision by the SEC will play a crucial role in shaping the future of cryptocurrency ETFs and their role in mainstream investment strategies.

In light of John Lo’s insights from Recharge Capital, the future of Ethereum ETFs, including Fidelity’s amended proposal, appears increasingly uncertain. Lo’s perspective underscores the heightened scrutiny the SEC is likely to apply to Ethereum ETFs, distinct from its approach to Bitcoin ETFs.

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