Ahead of the Ethereum hard fork (that happens July 20-21 depending on time zone) a new company has filed to launch an Ether ETF.
The Ethereum hard fork will likely restore investors’ interest in the network down to the pre-The DAO days and make Ether regain its plummeted value ever since,
EtherIndex LLC, a Delaware limited liability company formed June 15, on Friday filed with the Securities and Exchange Commission to launch a Trust that would be the first exchange-traded product (“ETP”) in the United States that seeks to track the price of Ether - the cryptocurrency that powers the Ethereum network.
The EtherIndex Ether Trust, which is coming just as the SEC is opening a proposal for a Bitcoin ETF by the Winklevoss Twins of Gemini for public comment, followed by a similar filing last Tuesday by SolidX, will issue EtherIndex Ether shares which represent units of fractional undivided beneficial interest in and ownership of the Trust. The shares will provide investors with an opportunity to access the Ether market through a traditional brokerage account.
Prior to this offering, there has been no public market for the shares.
The ETF is likely to increase the value of Ether as a digital commodity that’s based on the value token of the blockchain of the peer-to-peer Ethereum network if and when approved as it will provide shareholders with exposure to the daily change in the U.S. dollar price of Ether as measured by the EtherIndex and also ensure the issuance of additional shares on a continuous basis though it clearly states that the shares are speculative and investing in them involves a high degree of risk. It says Ether will be valued each business day using the EtherIndex Price.
However with several areas yet uncovered about EtherIndex’s filing, getting the best out of the plan is dicey. Aside its being about a month old company, its filing is incomplete as it didn’t name the Trust’s listing exchange, ticker, trustee or administrator. This is a red flag for its approval.
Also, there are several risk factors identified in the filing. They include that the Ethereum Network and the Ethereum Network software are in their early stages, the uncertainty in the limit on the supply of Ether, little or no use of Ether in the retail and commercial marketplace currently in comparison to relatively extensive use by speculators and miners thus contributing to price volatility, and the Sponsor and its management’s lack of experience and history of operating an investment vehicle like the Trust which may be inadequate or unsuitable to manage it properly.
Others are lack of assurance that an active trading market will develop or be maintained for the shares, shareholders having limited rights of legal recourse against the Trust, Trustee, Sponsor, Administrator, Trust Agency Service Provider and Custodian and the Trust’s lack of insurance protection which exposes the Trust and the holders of the shares to the risk of loss of the Trust’s Ether for which no person is liable.