Are you looking to invest in Ether and incorporate it as part of your formal investment strategy?
An Ether ETF is an excellent way to include it along with other investments as part of a portfolio.
With an average of over 1,000,000 Ethereum transactions per day in the first half of 2022, some investors are arguing that Ether has more utility than Bitcoin.
We will cover the best Ethereum ETFs in Canada below and outline some of their features.
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Pros and Cons of Ether ETFs
Investing in Ether through an ETF comes with its advantages and disadvantages. Some of these are shared with investing in the cryptocurrency directly through a crypto wallet.
Investing in Ether is very risky and will not do a good job of replacing a well-constructed investment portfolio.
Pros
- Potential tax benefits from using tax-advantaged accounts to invest in Ether
- The ability to group Ether along with your other investments
- Avoiding crypto wallet issues (such as forgotten passwords)
Cons
- Paying fees at the fund level for investing in Ether
- Trading the ETF at a bid-ask spread
- Lacking the benefits of direct ownership of Ether, like privacy
Choosing the Right Ethereum ETF For You
Evaluating Ethereum ETFs involves a multifaceted approach. Consider the diverse range of factors that can impact your decision:
- Cost Consideration: Beyond the Management Expense Ratio (MER), consider other hidden fees or transaction costs.
- Features and Flexibility: Some ETFs offer unique benefits. For example, Purpose’s Ether ETF’s carbon offset series could appeal to environmentally-conscious investors. Also, some ETFs might allow more flexibility in terms of trading, hedging against currency fluctuations, or offering multiple series like US dollar versions.
- Trustworthiness and Reputation: A higher Assets Under Management (AUM) might indicate market trust. However, reputation garnered through consistent performance, robust management, and transparency in operations is equally crucial.
- Liquidity: Ensure the ETF has good liquidity, which means it can be easily traded without causing significant price changes.
- Security Protocols: While all discussed ETFs use cold storage, the robustness of security protocols can vary. Consider multi-signature processes, insurance coverages, and other protective measures in place.
4 Best Ethereum ETFs in Canada
- CI Galaxy Ethereum ETF (ETHX-B.TO)
- Purpose Ether ETF (THH-B.TO)
- Evolve Ether ETF (ETHR.TO)
- 3iQ CoinShares Ether ETF (ETHQ.TO)
1. CI Galaxy Ethereum ETF
- Ticker: ETHX-B.TO
- US Dollar Ticker: ETHX.U.TO
- Inception Date: April 16, 2021
- Assets under Management: $289.46 Million
- Management Fee: 0.40%
- Management Expense Ratio: 0.81%
- Risk Rating: High
- Distributions: Annually
- Distribution Yield: 0%
- Cold Storage: Yes
- Stock Price: $12.83
- YTD Return: 0.84%
CI offers an Ether ETF to Canadians in both Canadian dollars as well as US dollars. The US dollar series of the ETF will have to be purchased on the US side of your investment accounts. The Canadian dollar series is unhedged and will be impacted by fluctuations between the US dollar and the Canadian dollar.
ETHX is a plain vanilla Ether fund and simply tracks the price movement of the cryptocurrency. The performance of the fund will reflect the price movements in Ether minus any fund fees.
The fund stores the underlying Ether in cold storage. This is a safe approach to storing the cryptocurrency as it protects it from hackers.
The fund is very large in terms of assets under management and is the lowest-cost Ethereum ETF option for Canadians.
ETHX is a top option to consider if you are looking for an Ether ETF, as it comes with the lowest fees in Canada.
2. Purpose Ether ETF
- Ticker: ETHH-B.TO
- Hedged Ticker: ETHH.TO
- US Dollar Ticker: ETHH.U.TO
- Carbon Offset Ticker: ETHH.J.TO
- Inception Date: April 16, 2021
- Assets under Management: $162.4 Million
- Management Fee: 1.00%
- Management Expense Ratio: 1.48%
- Risk Rating: High
- Distributions: Annually
- Distribution Yield: 0%
- Cold Storage: Yes
- Stock Price: $12.25
- YTD Return: 0.51%
Purpose also offers a fairly robust Ether ETF on the Canadian ETF shelf. Trading under the ticker ETHH, the fund comes in a hedged, unhedged, US dollar, and carbon offset series.
ETHH is another plain vanilla Ethereum fund that tracks the price movement of Ether. The performance of the fund will reflect the price movements in the cryptocurrency, less any fees.
The US dollar version of the fund will have to be purchased on the US side of your accounts here in Canada. The currency hedged version of the fund removes the impact of fluctuations between the US dollar and the Canadian dollar.
Purpose’s Ether ETF is unique because of its carbon offset series. This series uses the fees that it generates to offset the carbon produced by its fund.
ETHH also stores its Ether in cold storage, protecting it from hackers.
The ETF is large in terms of assets and is substantially more expensive than CI’s Ethereum ETF.
Purpose’s Ethereum ETF is a good option to consider if you are focused on investing responsibly and want to access the carbon offset series.
3. Evolve Ether ETF
- Ticker: ETHR.TO
- US Dollar Ticker: ETHR.U.TO
- Inception Date: April 19, 2021
- Assets under Management: $45.06 Million
- Management Fee: 0.75%
- Management Expense Ratio: 1.23%
- Risk Rating: High
- Distributions: Annually
- Distribution Yield: 0%
- Cold Storage: Yes
- Stock Price: $12.25
- YTD Return: -0.57%
Evolve is another key player in the Ethereum ETF space in Canada.
ETHR is available in a Canadian dollar unhedged series as well as a US dollar series. The US dollar series can be added to the US side of your investment accounts. The unhedged series will be impacted by fluctuations between the US dollar and the Canadian dollar.
ETHR is another simple Ether fund that tracks the price movement of Ether. The performance of the ETF should be similar to that of the cryptocurrency, minus the fees of the fund.
The ETF stores its Ether in cold storage, similar to the other ETFs on our list. This is the safest approach for holding the cryptocurrency.
ETHR is small in terms of assets under management and is substantially more expensive than CI’s Ether fund.
Evolve’s ETHR ETF is an option to consider on the Canadian shelf, but its high fees and lack of features make it hard to consider as a top choice.
- Ticker: ETHQ.TO
- US Dollar Ticker: ETHQ.U.TO
- Inception Date: April 19, 2021
- Assets under Management: $28.82 Million
- Management Fee: 1.00%
- Management Expense Ratio: 1.25%
- Risk Rating: High
- Distributions: Annually
- Distribution Yield: 0%
- Cold Storage: Yes
- Stock Price: $14.11
- YTD Return: 0%
3iQ is a digital asset manager in Canada that offers various cryptocurrency funds. ETHQ, its Ether fund, is a plain vanilla Ether fund tracking the price movement of the cryptocurrency.
ETHQ is available in an unhedged Canadian dollar series and a US dollar series. The US dollar series will have to be purchased on the US side of your investment accounts.
Similar to other Ether ETF providers in Canada, 3iQ’s ETF stores its Ether in cold storage. This is the safest approach to storing the cryptocurrency.
ETHQ is currently the smallest Ether ETF in Canada based on assets under management and is also the second most expensive option.
Given ETHQ’s high relative fund fees, it is again difficult to pick it as a top option for a Canadian Ether ETF.
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Are Ethereum ETFs Worth the Fees?
Deciding whether an Ethereum ETF is worth the fees that it charges will depend on your particular situation as an investor. Buying Ether directly is not very difficult, so the key advantage of an Ether ETF is its ability to be included in tax-preferred accounts.
The Canadian government, for income tax purposes, treats Ether and other cryptocurrencies like a commodity.
If you are adding an Ethereum ETF to a TFSA, you will be able to avoid paying taxes on any future gains. This is because a TFSA is funded with after-tax dollars, and any investment inside can grow tax-free.
Inside of an RRSP, you can trade an Ethereum ETF freely without any tax consequences (until you withdraw money from the account). RRSPs are funded with pre-tax dollars, and withdrawals from an RRSP are treated as income for tax purposes.
An investor who has contribution room available within a TFSA or RRSP (or other tax-preferred accounts) and that wants to allocate a portfolio of the portfolio toward Ether will find Ether ETFs extremely useful (and worth the fees).
If you are thinking of purchasing an Ethereum ETF within a non-registered account, the benefits are marginal, and you will likely be better off buying the cryptocurrency directly through a wallet (and saving on fees).
If you end up investing in an Ethereum ETF within a registered account, be mindful that locking in large losses can cause your retirement accounts to shrink permanently in size.
Strategies for Adding Ethereum ETFs to your Portfolio
Any portfolio allocation towards Ethereum within a properly-built portfolio should be for speculative purposes. It’s likely not a good idea to have a large percentage of your total assets invested in any cryptocurrency.
Typical building blocks of an investment portfolio generally include:
- Equities (stocks)
- Fixed Income (bonds, GICs, etc.)
- Alternatives (real estate, liquid alternatives, etc.)
- Cash
Cryptocurrencies, especially several years ago, were thought to be great portfolio diversifiers due to their low correlation to traditional investments. Throughout the market sell-off of 2022, cryptocurrencies like Bitcoin and Ether have fallen together with broader markets.
What is the Best Ethereum ETF?
Since all of the Ether ETFs in Canada are virtually identical, the best ETF will be the one that comes with the lowest fees. Currently, this is CI’s Galaxy Ethereum ETF.
Is It Better to Buy Ethereum ETF or Ethereum?
If you are looking to take advantage of tax-preferred accounts, it may be a better idea to buy an Ether ETF than the cryptocurrency directly. If you are investing in a non-registered account, you can save on management fees by buying Ether directly in a crypto wallet.
Can You Buy Ethereum within a TFSA?
Yes, investors are able to add Ether exposure within a TFSA through an Ethereum ETF.
How do I Pay Tax on Cryptocurrencies in Canada?
Cryptocurrencies are currently treated as commodities for income tax purposes in Canada by the CRA.
See more info on crypto taxes in Canada here.
How to Buy the Best Ethereum ETFs in Canada
The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:
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Conclusion
If you have plenty of space within accounts like your RRSP or TFSA, investing in Ether through an ETF may be an idea to consider.
It is likely a good idea to keep your allocation to Ether or other cryptocurrencies small and within the speculative portion of your investment portfolio.
As an alternative to Ethereum ETFs, make sure to also consider potentially investing in some of the best Ethereum stocks in Canada.
