ProShares, a prominent player in the crypto-linked exchange-traded fund (ETF) market, launched the first short Ethereum (ETH) ETF on Nov. 2.
The ProShares Short Ether Strategy ETF (SETH) is the world’s first short ETH-linked ETF, designed to provide investors with an opportunity to profit when the price of Ether experiences a decline.
SETH will be listed on the New York Stock Exchange and has been strategically developed to deliver the inverse of the daily performance of the S&P CME Ether Futures Index. Like the other ProShares crypto-linked ETFs, SETH seeks exposure through ETH futures contracts.
ProShares CEO Michael L. Sapir said:
“SETH is designed to address the challenge of acquiring short exposure to ether, which can be onerous and expensive. With today’s launch of SETH, ProShares now offers investors opportunities to profit both on days when ether increases and when it drops—all through the convenience of a traditional brokerage account.”
Risks
It’s important to note that investments in cryptocurrency-related assets come with unique risks. Both bitcoin and ether, along with their respective futures, represent relatively new asset classes and are subject to rapid changes and uncertainty, according to the press release.
ProShares added that its actively managed ETFs, including BITO, EETH, BETH, and BETE, face additional challenges associated with using futures contracts, imperfect benchmark correlation, leverage, and market price variance. These factors can increase volatility and affect performance. Notably, SETH is expected to experience losses when the daily price of ether futures rises.
Investors interested in these ETFs should know that shares are generally bought and sold at market price, not Net Asset Value (NAV), and are not individually redeemed from the fund. It’s also essential to consider brokerage commissions, which may reduce overall returns.
Subdued interest
Despite the launch of the ProShares Short Ether Strategy ETF (SETH), interest in ether futures ETFs remains subdued. The six ETH-based futures ETFs introduced recently have a combined AUM of around $20 million.
Experts suggest investors might be waiting for spot exposure to Ethereum, which the SEC could consider approving by May.
The macroeconomic environment during the launch of ether futures ETFs may have contributed to their modest performance, unlike the ProShares Bitcoin Strategy ETF (BITO), which debuted during a bullish Bitcoin period and quickly amassed assets.
The simultaneous approval of multiple ether futures ETFs from different providers may have diluted their impact. However, the launch of SETH underscores the industry’s commitment to innovative crypto-linked investment opportunities.
As optimism grows for spot Bitcoin ETF approval, it’s expected that spot ether ETFs could follow, rendering ether futures ETFs potentially “obsolete.”
The SEC has until Jan. 10 to rule on a proposed spot Bitcoin ETF, and a decision on spot ether ETFs could follow in May. Several companies are awaiting SEC approval for spot ether ETFs, setting the stage for increased diversity in cryptocurrency investments.