Will staking yield boost demand for Ethereum ETF if approved by the SEC?
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Fidelity is seeking the SEC’s permission for staking on its Ethereum ETFs.
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ETF staking could potentially offer an additional 3% yield to investors.
Fidelity, through the CBOE exchange, has filed an application with the SEC, seeking permission for staking provisions in its Ethereum [ETH] ETF product. This development follows similar applications from 21Shares and Grayscale in February, signaling growing optimism regarding the inclusion of staking features in U.S. spot ETH ETFs.
The products launched last summer currently boast approximately $7 billion in total net assets locked in custody accounts.
These assets could earn additional yield if staked—delegating part of ETH to validators to secure the blockchain network and reward them with extra tokens.
ETH Staking Rewards: Boosting ETF Potential
Even Bitwise is considering a similar filing in the U.S., suggesting that it would enhance investor returns. In a recent Bloomberg interview, Bitwise CEO Matt Hougan stated:
“ETPs should stake. We’ve seen in Europe that staking ETPs work and help increase investor returns and boost network security.”
Furthermore, Vivek Raman, founder of Etherealize, indicated that the absence of staking has “dampened” ETH ETF adoption. According to Raman, ETH ETF staking:
“Can open up more money; it can create a differentiated narrative around Ethereum.”
Source: Staking Rewards
According to Staking Rewards, staked ETH was attracting about 3.7% annualized returns as of the time of writing. These additional rewards can enhance investor interest in the ETH ETF.
At present, the only yield sources available to asset managers through ETH ETFs are limited to the CME Ethereum basis trade, which involves buying a spot ETH ETF and shorting the CME Futures to capitalize on the price difference (yield or basis).
During last November’s bullish trend, the CME ETH basis trade yielded nearly 20%. Incorporating staking rewards could amplify this to an impressive 23% yield.
Source: Velo
However, due to prevailing weak sentiment in the market, the CME basis trade had decreased to about 6% at press time. Nevertheless, factoring in staking returns could collectively provide around a **9% yield** for ETH ETF investors.
As per the latest market data, ETH was priced at **$1.88k**, reflecting a drop of 54% from its peak value of **$4k**. Whether ETF staking will ultimately enhance the altcoin’s valuation remains to be seen.
Conclusion
In summary, the approval of ETF staking by the SEC could open significant avenues for both investor engagement and returns on Ethereum products. By enabling staking, asset managers may not only increase yield for investors but also generate renewed interest in the Ethereum ecosystem. As developments unfold, keeping an eye on regulatory changes and market dynamics will be crucial for stakeholders in this evolving landscape.
