What I’m Telling My Clients About Ethereum ETFs

Cryptocurrency has been around for years, but it can still seem complicated, particularly when it comes to incorporating it into your investment strategy. Despite its long presence, cryptocurrency prices have surged since the 2024 presidential election—with the cryptocurrency market valued at over $3 trillion as of December 2024. And while you may not be using Ethereum to buy groceries just yet, it’s important not to overlook cryptocurrency.

What is Ethereum?

Ethereum is a global software platform run on decentralized blockchain technology. This platform is open source, which allows developers to create and run applications—also called DApps—for public use with no government or business ownership. These apps are used for banking, gaming, social media, and more. The cryptocurrency used on Ethereum is called Ether (ETH).

What is an Ethereum ETF?

An Ethereum ETF is an exchange-traded fund that invests in Ethereum. Some of these funds invest in Ethereum directly, while others invest in the anticipated future price of Ethereum, similar to options trading. Just like any other stock, you can buy or sell the ETF on your regular trading app or platform. Ethereum is the world’s second-largest cryptocurrency, right behind Bitcoin.

What is the Benefit of an Ethereum ETF?

Instead of buying Ether itself, you can buy shares of this fund, which invests in Ethereum’s value. You can add it to your existing investment portfolio without having to store it in a separate account or digital wallet. 

You need a special account or digital wallet to use Ether or other kinds of cryptocurrency. These are usually free to open, but you are charged a small fee for each transaction.

What I’m Telling My Clients

Cryptocurrency is still in its infancy. That’s why I recommend that Ethereum only make up 5% or less of an overall portfolio for my clients. Since its origination in 2014, Ethereum has experienced all types of ups and downs. There have been splits from the original, changes to the proof-of mechanism, and blockchain upgrades. While it’s the world’s second-largest cryptocurrency, there is still volatility and uncertainty surrounding it.

If you want to invest in crypto but are worried about the risks, you could pair an Ethereum ETF with a Bitcoin ETF. Bitcoin is strictly cryptocurrency. Ethereum is more than just crypto; it is a powerful platform for DApps, NFTs, and other applications. By holding both, you get a mix of what the crypto space offers while increasing your diversification. 

The Bottom Line

While Ethereum’s future looks bright, diversification is the key to stabilizing investments with high volatility. Ethereum ETFs allow you to own a piece of these new currencies while keeping your overall risk low. By focusing on long-term trends rather than short-term movements, you can reach a more stable investment approach while still incorporating crypto into your strategy.