Nasdaq has submitted an application to the Securities and Exchange Commission (SEC) to list an Ethereum exchange-traded fund (ETF) from Brazilian asset manager Hashdex. The ETF, called the Hashdex Nasdaq Ethereum ETF, aims to provide investors with a way to gain exposure to the price movements of Ethereum without the need to directly buy, store, or manage the digital asset themselves.
An Ethereum ETF functions as an investment fund that allows investors to trade shares on a regulated stock exchange, mirroring the price performance of Ethereum. The Hashdex Nasdaq Ethereum ETF will track the performance of ether, the native cryptocurrency of the Ethereum network, using both spot and futures contracts.
This approach offers several advantages for investors. By incorporating spot and futures holdings, the ETF aims to reduce reliance on potentially manipulated or illiquid spot markets. In addition, futures contracts can help hedge against any deviations between spot and reference prices of ether, thereby enhancing the tracking accuracy of the ETF. The utilization of futures contracts also lowers operational costs and risks, as physical delivery and storage of ether are not required.
According to the filing, the ETF’s shares will reflect the daily changes in the Nasdaq Ether Reference Price, which is derived from data provided by multiple sources, including spot and futures exchanges. The ETF plans to allocate its assets among spot ether, ether futures contracts traded on the Chicago Mercantile Exchange (CME), and cash and cash equivalents.
Hashdex’s ETF is not the only one seeking SEC approval to list on Nasdaq. Other fund managers like VanEck, WisdomTree, and SkyBridge Capital have also submitted applications for similar products. However, Hashdex’s ETF stands out due to its unique combination of spot and futures holdings, distinguishing it from most other proposals that focus only on one approach.
The SEC has thus far not approved any spot-based crypto ETFs in the United States, citing concerns over market manipulation, investor protection, and custody issues. However, it has granted approval for several futures-based crypto ETFs that exclusively hold bitcoin futures contracts traded on the CME, such as ProShares Bitcoin Strategy ETF and Valkyrie Bitcoin Strategy ETF.
Hashdex’s hybrid model, which balances the advantages and disadvantages of spot and futures exposures, may offer a compromise favored by the SEC. Nevertheless, it remains unclear whether the commission will embrace this approach or prefer a clearer distinction between the different types of exposure.
If the SEC approves Hashdex’s ETF, it could be a significant development for Ethereum and its ecosystem. The ETF has the potential to attract more institutional and retail investors to Ethereum, enhancing its liquidity, adoption, and overall innovation. Moreover, being listed on Nasdaq, one of the world’s most respected stock exchanges, would provide Ethereum with greater legitimacy and credibility as a viable asset class.
However, there are potential drawbacks to consider. The ETF’s existence could increase the volatility and correlation of ether’s price with other assets, as it would be subject to market forces and sentiment that may not reflect its underlying fundamentals or value proposition. Regulatory scrutiny and oversight may also intensify for Ethereum, requiring compliance with various rules and standards imposed by the SEC and other authorities.
Hashdex’s ETF proposal reflects the growing interest and demand for Ethereum among investors. Its success hinges on how the SEC evaluates the benefits and risks associated with the hybrid model and how it aligns with its broader vision and strategy for crypto regulation.
