BlackRock to Launch Staked Ethereum ETF

Ethereum staking just got a big endorsement from the dominant player in the ETF market.

BlackRock filed with the Securities and Exchange Commission on Monday for the iShares Staked Ethereum Trust ETF, which would expand its small but massively popular roster of crypto funds. It would be the first iShares product to utilize staking, or lending of digital tokens for the network’s consensus mechanism in return for additional ether.

“Anything BlackRock does is significant,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. “For advisors, having iShares on the label is huge.”

I Share the Market?

Of course, BlackRock extending into staked Ethereum may also mean that the company eventually captures most of the market share. In the case of Bitcoin, it certainly has, with its flagship crypto fund, IBIT, reaching nearly $100 billion in assets earlier this year, though since falling to $70 billion amid a price crash and resulting outflows. The company’s existing Ethereum fund (which doesn’t use staking) isn’t far behind on the leaderboard, representing the fourth-biggest crypto ETF, at over $11 billion. Bitcoin ETFs aside, that was the fastest ETF ever to reach $10 billion, Balchunas said. “They’ve got a mega-hit on their hands.”

As to why the company would offer both staked and unstaked versions, “it’s really about giving people choice,” he said. “Some people don’t want the yield for tax reasons.” Still, the staking yields for Ethereum are small (2-3%) compared with those of Solana (7-8%), he noted. The first US ETF to offer staking, the Rex-Osprey SOL + Staking ETF (SSK) launched in July and now represents about $190 million. Rex-Osprey launched a staked Ethereum ETF in September, but that product remains small, at less than $3 million in assets.

Even if BlackRock gobbles up the market share, there may be room for other asset managers:

• The iShares Ethereum Trust represents 55% of the Ethereum ETF market, but there are 26 other funds out there among more than 20 competitors, Balchunas said.
• About 10 have more than $100 million in assets, showing they are profitable, and five have more than $1 billion, he said.
• “There’s room for other people to eat, simply because the pie is so big,” he noted. Also, it helps that iShares (and others) don’t have to compete with the likes of Vanguard, he said.

Massive and Passive: “There is always an appeal to passive income, and since there aren’t many sources of it, staking is a compelling option,” said Kevin Feig, founder of Walk You To Wealth. With staking becoming more common among more crypto ETFs soon, such products will be compared to interest-paying bond funds or dividend-paying stock funds, he said. “Much like I wouldn’t recommend investing in a stock only because of the dividend, I wouldn’t invest in ETH or SOL simply because of staking, but if you already believe in the digital asset, staking now offers an income opportunity.”