The New York Stock Exchange (NYSE) has put forward a rule change that could shake things up for Grayscale’s Ethereum Trust (ETHE) and Grayscale Ethereum Mini Trust (EZET). They’re looking to allow these trusts to stake their ETH holdings.
What makes this proposal stand out is its goal to let the trusts earn rewards from staking their ETH, all while keeping those assets with their current custodian.
Pushing for Staking in Crypto ETFs
Staking plays a crucial role in Ethereum’s proof-of-stake (PoS) model, providing a way for holders to earn returns on their assets. If ETHE and EZET start staking, especially through reliable providers, it could significantly enhance their returns. This move could make these trusts more appealing to institutional investors, who are on the hunt for investment avenues that capitalize on staking advantages.
Grayscale insists their method diverges from the typical staking-as-a-service models that have caught the eye of the Securities and Exchange Commission (SEC). Their strategy is all about benefiting the fund shareholders directly. This means avoiding the pooling of assets with other parties, potentially easing some of the regulatory concerns.
Various industry proponents, such as Jito Labs and Multicoin Capital, have been vocal about their support for adding staking features to exchange-traded funds (ETFs). They believe this addition wouldn’t only serve investors’ interests but also showcase the genuine benefits of native network assets. Plus, it would enable issuers to play a role in bolstering the security of the networks these assets are housed on.
Ethereum Takes the Lead in ETF Inflows
This shift couldn’t come at a more critical time for Grayscale. Their ETHE product has experienced significant outflows—hitting nearly $4 billion—making it the biggest casualty among Ethereum investment products since spot Ethereum ETFs got the nod.
Meanwhile, the EZET has been having a tough time establishing itself in the market, drawing in just $650 million, which pales compared to its rivals.
In contrast, several Ethereum spot ETFs, particularly those from BlackRock and Fidelity, have enjoyed notable inflows, thanks to their lower fees and solid institutional endorsements.
We’re seeing a turn in the Ethereum ETF market’s dynamics, with Ethereum gaining steam in ETF flows. For the first week of February, it even surpassed Bitcoin in inflows, according to a report by CoinShares.
If the proposal by NYSE Arca goes through, it might just make ETHE and EZET far more appealing, potentially boosting their performance and stanching the outflows.
At the moment, ETH is trading at $2,645, marking a 20% loss over the last month for the cryptocurrency, which holds the position of the market’s second largest. Featured image sourced from DALL-E, and the chart is from TradingView.com.
