What are the 3 new Ether ETFs on the TSX?
The three Ether ETFs debuting on the Toronto Stock Exchange on April 20, 2021 are:
| Name | Ticker | Management Fee |
|---|---|---|
| Purpose Ether ETF | ETHH | 1.00% |
| CI Galaxy Ethereum ETF | ETHX | 0% until June 15,0.40% thereafter |
| Evolve Ether ETF | ETHR | 0% until May 31,0.75% thereafter |
The ETF providers offer the Ether ETFs in both CAD and USD, as well as hedged or unhedged.
What is Ethereum?
Ethereum is a blockchain software that has many applications but is most commonly known for its currency, Ether. The terms “Ether” and “Ethereum” are often used interchangeably to describe the cryptocurrency (you’ll see me refer to both in this article, too), but they are technically different things.
Ethereum is a technology that enables SmartContracts and Distributed Applications to run quickly and without any interference from third parties. It’s very secure and prevents any kind of fraud or forgery, making it useful for many applications across all industries, including finance, medicine, art, and sports. The “gas” that powers these transactions on the Ethereum network is the currency, Ether.
Ethereum vs Bitcoin
Ethereum has the second-largest market cap in the cryptocurrency marketplace, right behind Bitcoin. While Bitcoin has gotten most of the attention in the media, there are other cryptocurrencies worth considering. Not only that, but compared to other cryptocurrencies, Ethereum likely has the most long-term potential.
Cryptocurrency feels very new, but at the rate new computer technology develops, Bitcoin’s 2009 birthday makes it an old-timer. Ethereum launched in 2015 with much faster, and less resource-demanding technology than its Bitcoin predecessor. Furthermore, because Ethereum can be used for more than just currency, it has more applications than Bitcoin.
For anyone interested in more than just the financial impact of new technology, Ethereum is an ideal investment.
What is the Ether ETF?
The Ether ETF is an ETF that lets you invest directly into the popular cryptocurrency, Ether. Instead of buying full or partial Ether coins on a cryptocurrency exchange, you buy shares of an ETF on the stock market from an ETF provider that is investing directly in the currency.
Ether ETFs make investing in Ethereum more convenient and secure. Investors who find using a cryptocurrency exchange and digital wallets intimidating or lacking security can rely on the ETF providers and the trusted security of their brokerage accounts to invest in crypto. For both the Purpose and Evolve ETFs, Gemini will hold the underlying Ether in cold storage. CI Global Asset Management will rely on Galaxy Digital.
Ethereum ETF performance
The Ethereum ETF is brand new to the stock market, so it has no price history yet. However, Ethereum as a cryptocurrency has been trading since 2015. It debuted at only a few cents per coin and now is worth over $2,000 per coin. Year to date, Ethereum has returned over 190% to investors and there’s still more to be had!
I’ve personally been investing in Ethereum as long as I’ve been investing in Bitcoin. In fact, I’ve always thought Ethereum technology to be superior to that of Bitcoin because it has more applications than just currency. Often I split all my cryptocurrency investments, allocating 50% of my cash to Bitcoin and 50% to Ethereum.
Like with Bitcoin, I’m bullish on the long-term potential of Ethereum, and think it’s a great financial investment. The Ethereum ETFs are a perfect way for new investors to gain financial exposure to cryptocurrency.
How does this affect investing in Crypto?
The Ethereum ETF is yet another signal that cryptocurrency is increasingly being recognized as a legitimate investment. As more cryptocurrency ETFs appear on the stock market, more retail and institutional investors alike are taking positions in crypto.
Where cryptocurrency has historically been a speculative asset, it continues to become more mainstream as people recognize its value and utility. Ethereum is in an even better position than Bitcoin, because it’s less environmentally destructive to mine, and it can be used for many things. For example, NFTs (non-fungible tokens) that recently took the world by storm are on the Ethereum blockchain. Smart contracts for ownership of digital and physical assets are just one of the many applications of Ethereum.
By legitimizing and accepting Ethereum by making it a financial asset that can be accessed via the traditional stock market, we are making blockchain even more a part of our daily lives. Blockchain technology and cryptocurrency are here to stay, and now is a great time to get started investing.
What does this mean for the Canadian investor?
Not only does the Ethereum ETF make it easier than ever for Canadians to invest in Ethereum, but it also provides a unique opportunity to tax-shelter this crypto coin.
Because cryptocurrency typically trades on cryptocurrency exchanges, which are unregulated and uninsured, Canadians cannot open tax-sheltered accounts like the TFSA or RRSP on these platforms. However, you can open brokerage accounts under the TFSA or RRSP umbrella. Now that the cryptocurrency ETFs are available on the stock market, you can purchase these shares inside of registered accounts. This is a roundabout, but totally effective, way to tax-shelter your cryptocurrency gains.
How to invest in the Ethereum ETF, step-by-step
The Ethereum ETFs are trading on the Toronto Stock Exchange, so you can buy shares through a brokerage account you’re already using or through an online brokerage. There is no need to set up an account at a cryptocurrency exchange, everything you need is available on the trading platform you use. Here’s how to get started investing:
- Step 1: Log on to your brokerage trading platform during market hours
- Step 2: Look up the ticker of the Ethereum ETF you’re interested in investing in on the Toronto Stock Exchange
- Step 3: Select the number of shares you want to purchase
- Step 4: Click “Buy” and that’s it, you’re now invested in an Ethereum ETF!
Pros & cons
There are plenty of benefits a few downsides to investing in an Ethereum ETF. Here’s a brief overview of the pros and cons:
Pros
- Safe and secure. Purchasing Ethereum ETF shares on your brokerage account is safer and more secure than buying Ethereum on a cryptocurrency exchange
- Accessible. You can buy and sell shares of an Ethereum ETF on the stock market, just as you do any other stock or ETF
- Tax-Sheltered. You can hold your Ethereum ETF shares inside a registered account like a TFSA or RRSP to tax-shelter your gains
Cons
- High fees. The Ethereum ETFs have higher management and MER fees than most broad market funds Canadians are used to investing in
- Limited utility. The Ethereum ETF only gives you financial exposure to Ethereum, you cannot transfer your coins to a digital wallet or use them as currency to make purchases
- Can only trade during stock market hours. Because the cryptocurrency market is unregulated, trading never stops. However, the Toronto Stock Exchange is only open weekdays, during regular business hours. You are not able to trade the Ether ETFs outside of the regular hours of the TSX
Should you invest in the Ethereum ETF?
If you’ve been hesitating about investing in cryptocurrency, or are already invested in the Bitcoin ETF and looking to diversify your exposure to cryptocurrency, an Ethereum ETF is a great choice. It’s perfect for anyone who knows that having some exposure to cryptocurrency is important but isn’t sure how to get started because they only have experience with the traditional stock market.
However, if you currently have no investments of any kind yet, you’re better off starting your investment journey with more traditional ETFs, like index funds of the global stock and bond markets. The cryptocurrency ETFs will still be there when you’re ready to diversify!
Final word
The Ether ETFs are an exciting new addition to the Canadian financial markets and a wonderful way for retail investors to begin to build a diversified cryptocurrency portfolio. The future applications of Ethereum make the ETFs exceptionally attractive investments, and anyone bullish on new technology and the growing asset class of cryptocurrency should definitely consider investing!
