Ethereum ETF vs Staking: Which is Better for Investors?

The landscape of cryptocurrencies has seen a significant shift over the past few years. In 2019, only Tezos, a Proof of Stake blockchain, was among the top 20 cryptocurrencies. Fast forward to today, and 16 of the top 20 blockchains are based on Proof of Stake technology, representing about 22% of the total cryptocurrency market cap. Without Bitcoin, this number would be at a whopping 50%. This shift highlights the growing importance of staking in securing blockchains and providing value to investors.

2024 has been a big year for the global expansion of publicly traded crypto ETFs, with both Bitcoin and Ethereum ETFs receiving approval from the U.S. SEC. Ethereum, as a Proof of Stake blockchain, offers unique value to ETF holders and issuers. However, it also comes with regulatory challenges and operational considerations.

When it comes to staking ETH, there’s a clear demand in the market. Staking not only secures the Ethereum blockchain but also rewards stakers with yield. In the U.S., ETH ETFs are available, but none of them currently include staking due to regulatory pushback. On the other hand, countries like Switzerland and Canada have approved staking, allowing investors to increase their returns through staking rewards. ETFs provide a straightforward way for institutional investors to get involved in the crypto ecosystem, while purchasing spot and staking may involve more complexities and costs.

Investors who are considering between purchasing spot ETH and staking or going for an ETF will likely weigh factors like potential returns, costs, regulatory requirements, operational efforts, risks, and control. As more investors warm up to the idea of having ETH exposure, these factors can help them decide which route suits them the best.

Ethereum’s evolution from a Proof of Work to a Proof of Stake blockchain has been a significant technical milestone. Stakers lock up their ETH to validate blocks and secure the blockchain, earning rewards in return. This system allows investors to earn yield in addition to ETH price appreciation.

In the U.S., the journey towards crypto ETFs has been a long one, starting with private Bitcoin funds and eventually moving towards public listings. After the approval of Bitcoin ETFs in January 2024, Ethereum ETFs quickly followed suit with approvals in May 2024. Staking is a crucial consideration for Ethereum ETFs, given Ethereum’s Proof of Stake mechanism. While many initial Ethereum ETF proposals included staking, they were later removed to secure SEC approval.

Staking is already a part of many structured products outside the U.S., allowing investors to benefit from both ETH price appreciation and staking rewards. For example, VanEck’s Ethereum ETF (VETH) enables investors to access these benefits through European exchanges.