Canada Launches 3 New Ethereum ETFs. What do you need to know?
Ethereum has been on the rise in popularity over the last year and just hit a new record all-time high on Monday surpassing $3000 USD, making the year-to-date return on Ethereum over 300%. This is much larger than Bitcoin’s year-to-date return of 95% proving that Ethereum is growing at a much faster rate. Transactions on the Ethereum blockchain were also at an all-time high in April resulting in over 41 million transactions in the month alone. Now Canada has recently just launched the world’s first ETF for Ethereum, and it is not only one but instead, three new exchange-traded funds and these will be available to be traded as of April 20th, 2021.
Ehtereum is currently the second-largest cryptocurrency behind Bitcoin with over a $350 Billion market cap. Ethereum is considered to be a more practical form of crypto compared to Bitcoin which is considered to be digital gold and more of a store of value. Ethereum on the other hand was made to enable the deployment of smart contracts and decentralized applications and have them run with no interference from third parties such as banks and to save time on transactions.
Ethereum’s main popularity comes from its ability to provide services that use decentralized finance or also known as DeFi. In simple terms, DeFi is primarily a set of applications that will try to replace typical financial products such as lending, borrowing, and trading. This is done through decentralized technology so people no longer need to rely on large companies or banks for their transactions and these are usually built on the Ethereum blockchain, making it a popular cryptocurrency to invest in.
The three new Ethereum ETFs that will be available to trade on the TSX are ETHH, ETHR, and ETHX. The Ethereum ETF is great for many reasons, one of them being that it is a good way for retail investors to gain exposure to Ethereum without buying the crypto itself. Instead, they are given the opportunity of purchasing it through something they are more familiar with which are the ETFs.
Another benefit of the new ETFs is that it gives investors who may not be able to afford Ethereum to buy in at a cheaper price with the price of the ETFs being around $15 a share currently. Another great benefit of the new ETF is that since you are buying through your brokerage it is very easy to use and you can also hold these shares in your TFSA or RRSP which means you can grow your investment tax-free.
One final pro of owning an Ethereum ETF is that your investment is secured and cannot be stolen by a hacker since it is stored in the form of an ETF given by your brokerage. However, when buying Ethereum itself on the exchange there is the potential of losing your whole investment if not properly stored in a cold wallet, and with the ETF you are no longer exposed to this risk.
Along with the benefits of owning the Ethereum ETFs, we need to consider the cons of owning it compared to the coin itself. One of the downfalls of owning the ETF is that it is going to be more expensive over time because you will need to pay a yearly management fee to these ETF companies compared to owning Ethereum itself where there are no yearly fees. Another downfall of owning the ETF is that since it is a stock you can only trade during stock market trading hours compared to crypto which can be traded 24/7. This may be an important thing to think about because cryptos including Ethereum tend to be more volatile so having access to buy and sell whenever you want is something to consider. One final con of owning the Ethereum ETF compared to the real thing is that when you buy the ETF you do not actually own any Ethereum. This basically means you cannot use it and you lose the whole decentralized aspect of owning a cryptocurrency and the features that come with it.
Now that the pros and cons of the new Ethereum ETF have been weighed it is up to you to decide which investment you feel is right for you. This is not financial advice and always do your own due diligence before making an investment.
Do you see Ethereum being one of the biggest cryptocurrencies in the future? Will cryptocurrencies take over the whole financial system?
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Written by Aneeshan Balakaran