Nasdaq’s Hashdex Ethereum ETF Filing Adds to the Crypto ETF Competition

The Nasdaq stock exchange has taken a significant step by applying to the Securities and Exchange Commission (SEC) for approval to list an Ethereum Exchange-Traded Fund (ETF) offered by Hashdex, an esteemed asset management company. This ETF comes with a unique twist, as it combines spot ether holdings and futures contracts within its portfolio, representing a groundbreaking approach to cryptocurrency investment within the confines of regulatory guidelines.

This groundbreaking investment vehicle goes by the name of the Hashdex Nasdaq Ethereum ETF. It’s a trailblazer in the realm of cryptocurrency investment as it marks the first ’33 Act Ethereum futures filing under the ‘33 Act. To ensure that it operates in compliance with regulatory oversight, the ETF is under the watchful eye of Toroso Investments. Toroso Investments holds the distinction of being registered as a commodity pool operator with the Commodity Futures Trading Commission (CFTC) and is also a proud member of the National Futures Association.

The recent surge in cryptocurrency ETF applications has placed a particular spotlight on whether these proposed funds will include futures contracts or stick to spot assets. While the SEC has granted approval for the former, the latter remains in uncharted waters. Fund managers seem to be navigating this regulatory landscape by exploring a middle-ground approach, testing the waters with their innovative ideas.

The core investment objective of the Hashdex fund is to closely track the daily fluctuations in the Nasdaq Ether Reference Price through its shares. To achieve this, the fund plans to allocate its assets across a mix of investments in ether, ether futures contracts traded on the CME, as well as cash and cash equivalents. In its 19b-4 form, Nasdaq articulated:

“Instead of holding 100% spot Ether, which could make it more susceptible to price manipulation in the spot market, the Fund will hold a mix of Spot Ether, Ether Futures Contracts, and cash.”

By incorporating Ether Futures Contracts and cash into its holdings, the Fund aims to reduce its reliance on the spot market and address concerns regarding potential manipulation in unregulated Ether spot exchanges.

Hashdex has also ventured into the competition for a spot Bitcoin exchange-traded fund in the United States. However, what sets Hashdex apart is its unconventional approach. It won’t rely on the Coinbase surveillance sharing agreement but rather opt to acquire spot Bitcoin from physical exchanges within the CME market.

Notably, in the past week, both Ark Invest and 21Shares also submitted applications to the SEC for a spot ether ETF, a pursuit that VanEck is also actively engaged in. The SEC, at this juncture, has chosen to defer its determinations on all applications received for spot cryptocurrency funds, keeping investors and industry observers on edge.

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