Fidelity’s Ethereum ETF Proposal Updated to Embrace Staking

Key Takeaways:

Recognition of staking’s importance: By incorporating staking into their Ethereum ETF proposal, Fidelity acknowledges its growing significance in the Ethereum ecosystem. Staking allows investors to earn rewards by participating in the network’s consensus mechanism, thereby contributing to its security and decentralisation.

Enhanced yield potential: Staking provides an additional source of potential yield for investors beyond traditional price appreciation. By including staking in their ETF, Fidelity aims to offer investors exposure to Ethereum’s price movements and the rewards generated through staking activities, potentially enhancing the overall returns for investors.

Adaptation to changing market dynamics: Fidelity’s decision to update its ETF proposal reflects its commitment to adapting to evolving market trends and investor preferences. As staking gains traction in the cryptocurrency space, Fidelity’s move demonstrates its responsiveness to market demand and its willingness to offer innovative investment products that cater to the needs of cryptocurrency investors.

On March 18 2024, the United States Securities and Exchange Commission (SEC) received a filed 19b-4 amendment from Fidelity Investment suggesting that if an ETF were to be approved, the fund would stake an undisclosed amount of its digital assets via one or more trusted staking providers.

In its amended application, Fidelity wrote, “The sponsor may, from time to time, stake a portion of the Fund’sFund’s assets through one or more trusted staking providers, which may include an affiliate of the Sponsor (“Staking Providers”).” 

This move opens avenues for exposure to Ethereum and introduces the concept of staking within the ETF framework. 

The Significance of Staking in the Cryptocurrency Market

Staking has gained traction in the crypto community as a mechanism for securing blockchain networks and validating transactions. Unlike traditional proof-of-work (PoW) consensus mechanisms, which rely on computational power, staking involves participants locking up their tokens as collateral to support network operations.

One of the key advantages of staking is its potential to generate passive income for token holders. Investors can earn rewards through additional tokens by staking their assets, increasing their holdings over time. 

This feature has made staking an attractive option for long-term investors looking to maximise their returns in the crypto market. Several ETH staking providers, including StakeWise, Lido DAO and RocketPool, are in the market. Data at TradingView revealed that the price of Lido DAO, the largest liquid Ether staking provider, jumped by 6% from $2.48 to $2.56 on the news before falling back to $2.49.

Implications for the Future of Crypto Investing

Fidelity’s decision to include staking in its Ethereum ETF proposal could have far-reaching implications for the broader crypto market. As one of the world’s largest asset managers, Fidelity’s endorsement of staking as a viable investment strategy lends credibility to the concept and could encourage other institutional players to explore similar offerings.

According to reports, Fidelity is one of eight fund users who have lodged an Ethereum ETF application and is awaiting approval from the SEC. 

Fhumulani Lukoto Cryptocurrency Journalist

Fhumulani Lukoto holds a Bachelors Degree in Journalism enabling her to become the writer she is today. Her passion for cryptocurrency and bitcoin started in 2021 when she began producing content in the space. A naturally inquisitive person, she dove head first into all things crypto to gain the huge wealth of knowledge she has today. Based out of Gauteng, South Africa, Fhumulani is a core member of the content team at Coin Insider.

View all posts by Fhumulani Lukoto >

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