Fidelity, a leading asset management firm, has filed an application with the U.S. Securities and Exchange Commission (SEC) to include a staking feature in its Ethereum (ETH) exchange-traded fund (ETF). The request, submitted via the CBOE exchange, is part of a growing trend in the crypto investment space, with companies like 21Shares and Grayscale also seeking to introduce staking features in their Ethereum ETFs.

This development comes at a time when Ethereum ETFs, which introduced last summer, are managing around $7 billion in assets. Currently, these assets are held in custody accounts, but if approved for staking, they could generate additional yields for investors.

The Potential of Staking Ethereum ETFs

Ethereum staking allows holders of the cryptocurrency to delegate their tokens to validators who secure the Ethereum network, earning rewards in the process. These rewards, typically around 3% annually, could offer an attractive yield for investors in Ethereum ETFs.

Fidelity’s application follows a similar move by Bitwise, which has also signaled its intent to file for staking features in the U.S. market. Bitwise CEO Matt Hougan recently emphasized that staking exchange-traded products (ETPs) can enhance returns while strengthening the underlying blockchain network. In fact, he pointed to the success of staking ETPs in Europe as evidence of its potential.

Meanwhile, Ethereum founder Vivek Raman believes that adding staking to ETH ETFs could differentiate the product and significantly increase adoption. According to Raman, staking would bring in more capital, offering a compelling reason for investors to choose Ethereum ETFs.

Staking Rewards and Investor Returns

Staking Ethereum could provide investors with returns of approximately 3.7% annually, according to data from Staking Rewards. This extra yield could make Ethereum ETFs more attractive to institutional and retail investors alike.

Currently, Ethereum ETFs are limited to a yield derived from the CME Ethereum basis trade. This strategy involves buying the spot ETH ETF and simultaneously shorting CME Futures to capture the price difference. While this strategy yielded nearly 20% during the bullish market last November, it has since dropped to about 6% as sentiment has softened.

However, if staking rewards are included, Ethereum ETFs could offer an estimated 9% yield for investors, combining the CME basis trade with the 3% staking returns.

Will Staking Push Ethereum’s Value Higher?

Ethereum’s price, currently at $1,880, remains significantly lower than its all-time high of $4,000. While the inclusion of staking rewards in Ethereum ETFs could offer higher yields, it remains uncertain whether this will lead to a sustained rise in the altcoin’s value.

Ultimately, whether staking will boost demand for Ethereum ETFs depends on the SEC’s decision. If approved, it could potentially reshape the landscape for Ethereum ETFs, offering enhanced returns and attracting more investor interest.

Conclusion

Fidelity’s push for SEC approval to include staking in its Ethereum ETF could be a game-changer for crypto investors. Staking offers the potential for added yield, increasing the attractiveness of Ethereum ETFs to both retail and institutional investors. However, the future of these products hinges on regulatory approval, and it remains to be seen whether staking will boost Ethereum’s value or simply improve returns for current investors.

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