Digital asset fee war erupts in Canada as world’s first ether ETFs prepare for launch

Apr 19th, 2021 | By | Category: Alternatives / Multi-Asset

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The world’s first directly backed ether ETFs are preparing to launch with Purpose Investments, CI Global Asset Management, and Evolve Funds all set to bring products to market this week.

Fee war erupts as world’s first ether ETFs prepare for launch

Purpose Investments, CI Global Asset Management, and Evolve Funds are all scheduled to launch directly backed ether ETFs this week.

The Purpose Ether ETF, Evolve’s Ether ETF, and the CI Galaxy Ethereum ETF are all due to begin trading on the Toronto Stock Exchange on Tuesday, 20 April.

The funds, which are authorized as alternative funds under local regulations, will track the price movement of ether, the world’s second-largest cryptocurrency and native token of the Ethereum blockchain.

Ethereum is the largest and most well-established, open-ended decentralized platform and the leading venue for the deployment of smart contracts.

Each ETF will be fully backed by ‘physically’ settled ether, offering investors direct access to the digital asset without the inconvenience, technical challenges, and associated risks of self-custody within a digital wallet. The funds’ actual ether holdings will be stored using institutional-grade custody solutions.

The USD price of ether has soared by approximately 1,070% over the past year, as of 19 April. This rally has been driven by surging interest from retail investors looking to expand their digital asset portfolios beyond bitcoin as well as favourable response to the Ethereum 2.0 upgrade which aims to make the platform more scalable, secure, and environmentally sustainable.

Rivalry

Purpose, CI Global, and Evolve had all been vying to claim the title of world’s first ether ETF issuer, a distinction that now appears will be shared between them.

The rivalry between the three issuers is ongoing and stems recently from a battle to establish the most successful bitcoin ETF following the decision by Canadian securities regulators earlier this year to begin greenlighting some digital asset ETFs.

Purpose was first to market on a bitcoin ETF with its speed proving to be highly advantageous. The Purpose Bitcoin ETF (BTCC.U CN), which has maintained its at-launch management fee of 1.00%, is currently the largest bitcoin ETF with just over $1 billion in assets.

Despite launching shortly afterward, Evolve and CI Global have both lowered the original price tags of their bitcoin ETFs in a bid to capture market share. Evolve’s Bitcoin ETF (EBIT CN) and the CI Galaxy Bitcoin ETF (BTCX.U CN) come with management fees of 0.75% and 0.40%, respectively. Each fund currently houses around $100 million in assets.

With Purpose, Evolve, and CI Global now sharing a common launch date for their ether ETFs and thus no opportunity for first-mover advantage, the issuers are already focusing on competing on price.

The ETFs

The Purpose Ether ETF is due to list with currency-hedged Canadian dollar (Ticker: ETHH CN), unhedged Canadian dollar (ETHH.B CN), and US dollar (ETHH.U CN) share classes. It will track the TradeBlock ETX Index with the fund’s ether holdings being custodied by Gemini Trust. It will come with a management fee of 1.00%.

Evolve’s Ether ETF is due to list with unhedged Canadian dollar (ETHR CN) and US dollar (ETHR.U CN) share classes. It will track the CME CF Ether-Dollar Reference Rate and will also use Gemini Trust to custody the fund’s ether holdings. The fund will come with a management fee of 0.75% which Evolve has agreed to waive until the end of May 2021.

The CI Galaxy Ethereum ETF is also due to list with unhedged Canadian dollar (ETHX CN) and US dollar (ETHX.U CN) share classes. It tracks the Bloomberg Galaxy Ethereum Index and will be sub-advised by Galaxy Digital Capital Management, the asset management arm of Galaxy Digital, a financial services firm dedicated to the digital asset and blockchain technology sector. This fund will come with the lowest management fee of 0.40%. Shortly after Evolve announced the waiver for its ether ETF, CI Global stated that it would also waive the management fee on ETHX until 15 June 2021.

Whether investors gravitate towards the lower-cost products or whether Purpose will be able to leverage the popularity of its bitcoin ETF to drive interest in its ether product remains to be seen.

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