Looking for an easy way to invest in Ethereum? Cryptocurrency investing has become increasingly popular over the last few years as several of the top digital assets in this asset class soared to new all-time highs during 2020.
After the first Bitcoin ETF launched in February 2021, retail investors finally got the opportunity to add exposure to the world’s most popular cryptocurrency in their investment portfolios using an Exchange-Traded Fund (ETF).
Now you have the opportunity to add Ethereum to your investment portfolio with the launch of Ethereum ETFs in Canada.
In this post, I will list down and discuss the best Ethereum ETF in Canada that are currently available to Canadians and how to buy them so that you can make an informed decision about investing in the second-largest cryptocurrency in the world.
If you’re curious about Ethereum ETFs but new to the investment world, I will give you a short explanation about what Ethereum ETFs are to help you understand what this asset class is.
ETFs are funds created by investment firms that are considered ideal for investors to get exposure to a group of securities, allowing them to diversify their capital across several securities.
Traditionally, ETFs provide a relative degree of safety to your investment capital by diversifying it into different assets. It means that if the price of one of the securities held by the fund declines, the relative stability in the price of the other assets in the fund can mitigate your losses.
Cryptocurrency ETFs like Ethereum ETFs are different from traditional ETFs. Instead of investing in a basket of securities, Ethereum ETFs invest in physically settled Ether tokens and stores them in cold storage for you.
Essentially, when you buy an Ethereum ETF, you get access to returns on your investment as you would by buying the cryptocurrency itself, without investing in Ether yourself directly.
It is a better alternative to invest in Ether because it lets you get exposure to Ethereum without facing the challenges of buying and storing your own Ether tokens.
Traditionally, buying Ether would require you to sign up to a cryptocurrency exchange and worry about the storage and security of the digital assets you purchased.
On the other hand, buying the best Ethereum ETF in Canada is as simple as using an existing brokerage account with your favourite trading platform to purchase the fund and storing it in an account of your choice.
It’s important to remember not to get confused between blockchain ETFs and Ethereum ETFs in Canada. Ethereum ETFs are funds that invest 100% of their assets under management in the underlying cryptocurrency, while blockchain ETFs have holdings in companies that develop or use blockchain technology.
The funds don’t specifically invest in cryptocurrencies.
Ethereum ETFs are a high-risk asset because the underlying commodity is very volatile and experiences significant intraday price changes.
Since these ETFs allocate 100% of the capital to the underlying digital asset, the value of these funds will also be subject to volatility. You might not want to invest in them unless you have a high-risk tolerance.
There are currently four Ethereum ETFs that have been approved for trading on the Toronto Stock Exchange in Canada.
Key facts about CI Galaxy Ethereum as of August 24, 2021:
- Ticker: ETHX.B, ETHX.U
- Inception date: April 16, 2021
- Assets Under Management (AUM): $688.570 million
- Management Fee: 0.40%
CI Galaxy Ethereum ETF (ETHX) trades on the TSX under two ticker symbols, ETHX.B (CAD unhedged) and ETHX.U (USD unhedged).
The Ether ETF was launched by CI Investments in partnership with Galaxy Digital Capital Management on April 16, 2021, becoming the world’s first Ether ETF with the lowest management fee.
ETHX ETF offers the lowest management fee among its peers at just 0.40%, and its Management Expense Ratio (MER) is capped at 0.95%. The fund is eligible to buy and store in registered and non-registered accounts.
There is no performance or investment returns data available for the fund because it has been trading on the TSX only for a few months at writing. The performance data will be available to investors when the fund completes a year of trading on the TSX in April 2022.
Key facts about Purpose Ether ETF as of August 26, 2021:
- Ticker: ETHH, ETHH.B, ETHH.U
- Inception date: April 16, 2021
- Assets Under Management (AUM): $259.1 million
- Management Fee: 1.00%
Purpose Investments is the firm responsible for issuing the world’s first cryptocurrency ETF when it launched BTCC in February 2021.
Purpose Ether ETF (ETHH) is the Ethereum ETF offering by the same investment firm that trades on the TSX under three ticker symbols: ETHH (CAD hedged), ETHH.B (CAD non-hedged), and ETHH.U (USD non-hedged).
You can buy and hold Purpose Ether ETF in registered and non-registered investment accounts. ETHH ETF comes with a 1.00% management fee, and its MER may go as high as 1.50%, making its fees considerably higher than ETHX.
The data on the performance and returns for ETHH will not be available until April 2022, when it completes a year of trading on the TSX.
Key facts about Evolve Ether ETF as of August 25, 2021:
- Ticker: ETHR, ETHR.U
- Inception date: April 19, 2021
- Assets Under Management (AUM): $74.151 million
- Management Fee: 0.75%
Evolve Ether ETF (ETHR) started trading on the TSX around the same time as CI Galaxy Ethereum ETF and Purpose Ether ETF, but it has considerably lower assets under management.
The ETF trades on the TSX under two ticker symbols, ETHR (CAD hedged) and ETHR.U (USD non-hedged), and it is also available to trade on the Montreal Exchange. You can buy and hold the ETF in a registered and non-registered investment account.
The management fee for ETHR is 0.75%, making it more cost-efficient than ETHH but more expensive than ETHX. However, the MER is not currently available. The performance and returns for ETHR are not going to be available until April 2022, when the ETF completes a year of trading on the TSX.
Key facts about 3iQ CoinShares Ether ETF as of August 25, 2021:
- Ticker: ETHQ, ETHQ.U
- Inception date: April 19, 2021
- Assets Under Management (AUM): $345.882 million
- Management Fee: 1.00%
The 3iQ CoinShares Ether ETF (ETHQ) is the fourth Ethereum ETF to get approval in Canada in 2021. ETHQ is offered by 3iQ, the most prominent digital asset investment fund manager in the country, in partnership with CoinShares, the largest digital asset fund manager in Europe.
ETHQ trades on the TSX under two ticker symbols, ETHQ (CAD) and ETHQ.U (USD). You can invest in the ETF through a registered and a non-registered investment account.
The management fee for ETHQ is 1.00%, and its MER has been capped at 1.25%, making it less expensive than Purpose Ether ETF but pricier than Evolve Ether ETF and CI Galaxy Ethereum ETF. The data for its performance and returns will not be available until April 2022, when the ETF completes a year of trading on the TSX.
How To Buy Ethereum ETFs in Canada
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Is It Better To Buy Ether or an Ethereum ETF?
Before cryptocurrency ETFs came along, people investing in Ethereum and Bitcoin had to purchase them on cryptocurrency trading platforms. Many investors might find it more straightforward to buy Ether through a cryptocurrency exchange instead of gaining exposure to the cryptocurrency through an ETF.
However, cryptocurrency exchanges have a notorious reputation for being very slow with processing payments and transactions, buggy, and vulnerable to hackers.
Cryptocurrency investors using these exchanges often find themselves waiting several days for their transfers to be approved so that they can deposit money into their accounts for trading.
Unfortunately, it means that if you are trying to quickly buy Ether as its price is rising so that you can sell it before the price declines and capture profits, you might miss the opportunity due to the delays. Ethereum ETFs are a far more liquid investment than directly investing in Ether through a crypto exchange.
When you buy and hold an Ethereum ETF in Canada, you are directly investing in Ether through an existing brokerage account without having to create an account with a cryptocurrency exchange. Since you already have an account, you won’t have to worry about delays with being able to buy and sell your holdings quickly.
Secure storage for your digital assets is another concern when you’re buying cryptocurrencies like Ether. When you purchase Ether through a cryptocurrency exchange, you are solely responsible for storing it in your digital wallet.
Unfortunately, it means that forgetting your password or accidentally deleting your digital wallet could result in a permanent loss of your holdings. You could also lose access to your Ether holdings if hackers compromise the security of your digital wallet.
When you buy an Ethereum ETF in Canada, the investment firm that issued the fund is responsible for buying and holding the Ether tokens on your behalf. These ETFs are regulated by bodies like the Canadian Investor Protection Fund (CIPF) if the brokerage firm becomes insolvent.
Additionally, these funds store the cryptocurrency holdings in cold storage, ensuring protection from data breaches and hackers.
On the flip side, buying Ether directly through a cryptocurrency exchange means that you do not have to pay anyone a management fee. Some of the best Ethereum ETFs in Canada charge high management fees, with MERs going up to as high as 1.50%.
Ethereum and all other cryptocurrencies are currently not considered legitimate currencies. Due to the persistent regulatory issues surrounding cryptocurrencies, it is not an asset that you can trade on the TSX or any other stock market worldwide.
Since ETFs are regulated securities, you can also buy Ethereum ETFs in registered accounts like a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP) to enjoy tax-free returns on your investment. You can also store the ETF in a taxable non-registered account.
It is unlikely that we will see Ethereum trade on the TSX or any other stock market anytime soon, but it remains to be seen. Until such a time comes, Ethereum ETFs would be the best way to gain exposure to Ethereum if you want to avoid the challenges that come with directly investing in decentralized digital assets.
There are several benefits of buying Ethereum ETFs in Canada, but it also comes with a few drawbacks. Understanding the pros and cons of buying Ethereum ETFs in Canada can help you weigh the benefits to identify whether Ether ETFs could be a suitable investment for your portfolio.
Here are some of the benefits of holding Ethereum ETFs:
- Registered Accounts: Ether ETFs are regulated securities that you can hold in registered investment accounts without worrying about compromising the Canada Revenue Agency’s (CRA) rules on qualifying investments. Holding Ether ETFs in a TFSA or RRSP could help you reduce your tax liabilities on any income from the assets and keep more of your returns.
- Accessibility and Liquidity: Canadian Ethereum ETFs make it easier for you to invest in Ethereum by eliminating the process of signing up with a crypto exchange or worrying about keeping your digital wallet safe. Additionally, Ether ETFs are a more liquid asset that you can easily buy and sell without lengthy waiting times.
- Security: Ether ETFs offered by the different investment firms are stored in cold storage to mitigate the risk of hacking and data breaches.
Here are some of the drawbacks of holding Ethereum ETFs:
- Less Control: When you invest in an ETF, you are paying the investment firm that issued the ETF to manage your capital in the fund for you. It means that you cannot transfer any of the underlying Ether to your private wallet.
- Higher Fees: Ethereum ETFs in Canada come with hefty management fees and higher management expense ratios than most low-cost ETFs in Canada.
Cryptocurrency investing is far easier now with the advent of Ether ETFs in Canada. You can quickly and cheaply invest in Ether through these ETFs without the challenges and concerns you might face with buying the cryptocurrency directly through a crypto exchange.
It is difficult to determine which of the funds I have listed is the best Ethereum ETF in Canada.
If you are thinking of the lowest management fee alone, CI Galaxy Ethereum ETF (ETHX) has the lowest fee and its MER is capped at 0.95%, making it the ideal investment to consider.
However, if you want to invest directly in Ether to have better control over your holdings and avoid high management fees, you can invest in the cryptocurrency through a crypto exchange like Wealthsimple Crypto available through Wealthsimple Trade.
Check out my Wealthsimple Crypto review to learn more about this crypto trading platform.