In-depth analysis of the Ethereum ETF market: How low-cost funds can resist long-term erosion
Spot Ethereum exchange-traded funds (ETFs) have become the preferred tool for mainstream investors to deploy blockchain assets. Since the first product launches in July 2024, these ETFs have surpassed
Spot Ethereum exchange-traded funds (ETFs) have become the preferred tool for mainstream investors to deploy blockchain assets. Since the first product launches in July 2024, these ETFs have surpassed tens of billions of dollars in total assets under management (AUM), reflecting strong demand from institutional and retail investors. However, for long-term holders, the fund's fee structure is crucial. High fees not only directly deduct annual returns but also amplify erosion through compounding effects, potentially eroding the long-term value of investments.
Based on the latest market data (as of August 22, 2025), we highlight five mainstream Ethereum ETFs: Grayscale Ethereum Trust ETF (ETHE), iShares Ethereum Trust ETF (ETHA), Grayscale Ethereum Mini Trust ETF (ETH), Bitwise Ethereum ETF (ETHW) and the VanEck Ethereum ETF (ETHV). These products are based on spot Ethereum and are benchmarked by the CME CF Ether-Dollar Reference Rate, which is designed to closely track ETH prices. However, there are significant differences in expense ratio and management fee, which directly affects the suitability of long-term holding.
Comparison of fee structures of five ETFs
ETHE (Grayscale Ethereum Trust ETF): Expense ratio 2.50%, management fee 2.50%. As the earliest Ethereum trust product (listed on December 14, 2017), its high fee rate stems from historical structure, but this seems outdated in the current competitive ETF market. NAV is $39.940, issuer is Grayscale, custodian is Coinbase Custody Trust Company.
ETHA (iShares Ethereum Trust ETF): Expense ratio 0.25%, management fee 0.25%. Issued by BlackRock, listed on June 4, 2024, with a NAV of $34.657. The fund benefits from BlackRock's economies of scale, but with slightly higher fees than emerging competitors.
ETH (Grayscale Ethereum Mini Trust ETF): Expense ratio 0.15%, management fee 0.15%. This is the "mini" version of Grayscale, which went on sale on July 23, 2024, with a NAV of $36.590. Designed to lower the fee threshold, the custodian is also Coinbase.
ETHW (Bitwise Ethereum ETF): Expense ratio 0.20%, management fee 0.20%. Bitwise was issued on July 22, 2024, with a NAV of $45.560. Focus on crypto-native investments with low to medium fees.
ETHV (VanEck Ethereum ETF): Expense ratio 0.20%, management fee 0.20%. Issued by VanEck on June 25, 2024, with a NAV of $70.860. The fund emphasizes value exposure, but the fees are comparable to ETHW.
From the data, it can be seen that the expense ratio ranges from 0.15% to 2.50%, which is huge. In an environment where the annualized volatility of the crypto market often exceeds 50%, low-fee funds are better able to retain returns.
Quantifying the impact of cost and erosion
The expense ratio is the percentage paid annually by investors to cover operating costs. For short-term traders, this may be insignificant; However, for long-term holders (horizon more than 5-10 years), the erosion effect cannot be ignored. Assuming an annualized return of 10% for Ethereum (based on historical averages 2017-2025, not future forecasts), we use a compound growth model to evaluate:
Net return formula: Terminal value = Initial investment × (1 + return rate - expense ratio) ^ number of years held
Take an initial investment of $100 and holding for 10 years as an example:
ETHE (2.50%): Net terminal value of approximately $201, eroding potential returns of approximately 25% ($259 without fees).
ETHA (0.25%): Net final value of about $249, erosion of about 4%.
ETH (0.15%): Net final value of about $255, erosion of only about 1.5%.
ETHW/ETHV (0.20%): Net final value of about $252, erosion of about 3%.
High fees such as 2.50% of ETO can be overshadowed by price increases in a bull market, but in the 2022-2023 bear market, it will accelerate NAV decay, leading to amplified real losses for investors. Conversely, low-fee funds such as ETH's 0.15% allow for more capital compound growth, especially in a long-term bull market driven by the Ethereum ecosystem such as Layer 2 solutions and DeFi growth.
Combining costs and erosion factors, the Grayscale Ethereum Mini Trust ETF (ETH) is the best choice among the five. Its 0.15% expense ratio is not only the lowest but also reflects Grayscale's strategic alignment to market competition – moving from ETHE's high-fee trusts to a more efficient ETF structure. This makes ETH erode the least in long-term holdings: only 0.15% of the return is deducted annually, and when compounded, it retains more value for investors.
Why did ETH win?
Cost advantage: nearly 17 times lower than ETHE, 40% lower than ETHA, and 25% lower than ETHW/ETHV. This directly translates into higher net returns, especially during periods of inflation or low growth.
Erosion minimization: Low fees reduce the "fee drag", and the fund aims to reflect ETH price performance rather than being diluted by operating costs. The credibility of custodian Coinbase further reduces operational risks.
Long-term suitability: As a "Mini" product, the stake size of ETH (approximately $45 million) provides good liquidity and avoids redemption pressure from small funds. At the same time, Grayscale's crypto experience ensures that the fund remains resilient amidst regulatory changes, such as potential ETH staking integration.
Avoid comparative disadvantages: ETH's high fee rate is suitable for short-term speculation, but long-term erosion is too heavy; ETHA's BlackRock endorsement is reliable, but the 0.25% fee is slightly higher; ETHW and ETHV fees are comparable, but ETH's 0.15% edge advantage can accumulate significant differences over a holding period of more than 10 years.
Of course, investment decisions should consider overall market risks, including regulatory uncertainty about Ethereum (such as the SEC's stance on staking) and macro factors (such as the Federal Reserve's interest rate policy). Investors are advised to hold ETH through diversified portfolios and regularly review AUM growth and liquidity metrics.