Asher Draycott Mar
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Bitcoin and Ethereum ETF Approvals in the US: What Changed and What’s Next

For over a decade, investors watched as the U.S. Securities and Exchange Commission (SEC) repeatedly turned down Bitcoin ETF applications. The first one came in 2013. By 2023, there were 13 rejections. Then, everything flipped. On January 10, 2024, the SEC approved the first spot Bitcoin ETFs. Six months later, on July 23, 2024, they did it again - this time for Ethereum. Suddenly, two of the biggest digital assets were no longer just for tech-savvy traders or crypto natives. They were now part of mainstream investment portfolios, accessible through brokerage accounts like Fidelity, Charles Schwab, and Robinhood.

Why the SEC Changed Its Mind

The turning point wasn’t a new law or a congressional vote. It was a court decision. In August 2023, the D.C. Circuit Court ruled that the SEC had been inconsistent in how it handled Bitcoin ETF applications. The agency had approved Bitcoin futures ETFs years earlier but kept rejecting spot ETFs, claiming they were too risky. The court called that logic flawed. That ruling forced the SEC’s hand. They couldn’t keep denying Bitcoin ETFs without looking arbitrary.

Then came the real game-changer: the July 29, 2025, approval of in-kind creation and redemption for crypto ETFs. Before this, ETFs like BlackRock’s IBIT and Fidelity’s FBTC could only be created or redeemed using cash. If you wanted to buy shares of the Bitcoin ETF, you paid cash. If you wanted to redeem them, you got cash back. That meant every trade triggered a taxable event - even if you never sold your Bitcoin. It also meant the ETFs had to constantly buy and sell Bitcoin on open markets, which created price distortions and higher fees.

The new in-kind system changed all that. Now, authorized participants can swap actual Bitcoin or Ethereum for ETF shares - no cash involved. This is how gold ETFs like GLD have worked for 20 years. It’s cleaner, cheaper, and more efficient. By October 2025, BlackRock alone had processed over $3 billion in Bitcoin conversions using this method. Investors who held Bitcoin in wallets could now move it into an ETF without selling. No capital gains. No tax bill. Just a simple swap.

Bitcoin ETFs vs. Ethereum ETFs: Key Differences

At first glance, Bitcoin and Ethereum ETFs look similar. But under the hood, they’re very different.

Bitcoin ETFs are straightforward. Bitcoin runs on proof-of-work. No rewards. No staking. Just holding. All 11 approved Bitcoin ETFs operate the same way: they hold Bitcoin, store it securely, and track its price. Fees range from 0.00% (Fidelity’s FBTC) to 0.90% (Grayscale’s GBTC). Most sit around 0.25% - close to the average for stock ETFs.

Ethereum is more complex. It runs on proof-of-stake. That means validators earn rewards for securing the network. Those rewards are real money - over $127 million in the third quarter of 2024 alone from Grayscale’s ETHE. But here’s the catch: only 5 out of the 11 Ethereum ETFs chose to participate in staking. The rest treat Ethereum like Bitcoin - just holding it. Those that do stake, like Grayscale, ETHE, and VanEck’s EETH, pass those rewards to investors quarterly. That’s a big deal. It turns Ethereum from a speculative asset into one that generates yield.

Fees for Ethereum ETFs are higher, too. The average is 0.35%, but Grayscale’s ETHE charges 1.50%. Why? Because it started as a trust, and the transition to an ETF didn’t lower its fees. Investors are paying extra for brand recognition. Meanwhile, VanEck’s EETH charges just 0.15% - cheaper than most Bitcoin ETFs.

Market behavior shows the split, too. By September 2025, Bitcoin ETFs held $54.3 billion in assets. Ethereum ETFs held $18.7 billion. But during Q3 2025, Bitcoin ETFs saw $1.2 billion in net outflows. Ethereum ETFs? They gained $478 million. Why? Because investors saw Ethereum’s staking rewards as a hedge against rising interest rates. When the Fed kept rates high, people looked for yield. Ethereum ETFs offered it. Bitcoin didn’t.

What In-Kind Processing Really Means for You

The in-kind system isn’t just a technical upgrade. It’s a structural revolution.

Before July 2025, if you held Bitcoin in your Coinbase wallet and wanted to move it into an ETF, you had to sell it on the exchange, pay taxes on the gain, then buy shares of the ETF with cash. That’s expensive. And messy. Now? You can transfer your Bitcoin directly into the ETF’s custody system. No sale. No tax event. Just a clean swap. This is huge for long-term holders - especially those with large positions.

Institutional investors are already using this for estate planning. Bloomberg reported that 78% of surveyed institutions now prefer holding Bitcoin through ETFs because they can use ETF shares as collateral for loans. Banks accept them. Custodians know how to handle them. It’s easier than dealing with private keys and cold storage.

Even retail investors benefit. Reddit users in r/CryptoMarkets praised the ‘regulatory clarity’ but slammed Grayscale’s high fees. Trustpilot reviews of Coinbase’s ETF integration show 72% of users loved how easy it was to move from self-custody to ETF exposure. But 28% complained about confusing tax docs. The IRS hasn’t issued clear guidance on in-kind transfers yet. That’s a risk. If you’re moving crypto into an ETF, you need to track the cost basis of the original coins - even if you didn’t sell them.

An elderly woman exchanging a Bitcoin coin for an ETF certificate at a cozy brokerage counter, with glowing Ethereum light and robotic owls nearby.

Market Numbers: Who’s Winning?

As of September 30, 2025, here’s how the market breaks down:

Bitcoin ETFs: $54.3 billion AUM. BlackRock’s IBIT leads with $16.9 billion (31.2% of the market). Fidelity’s FBTC is second, with $10.1 billion.
Ethereum ETFs: $18.7 billion AUM. Grayscale’s ETHE leads with $5.1 billion (27.3%). Fidelity’s FETH is close behind at $4.8 billion.

Trading volumes tell another story. On October 15, 2025, Fidelity’s FETH hit $842 million in 24-hour volume - 17.3% of all Ethereum ETF trading. That’s more than half the volume of the next two largest Ethereum ETFs combined.

Premiums matter, too. Bitcoin ETFs trade at an average 0.08% premium to their net asset value (NAV). Ethereum ETFs trade at 0.23%. That means investors are willing to pay more for Ethereum ETFs. Why? Because they believe in staking rewards. They believe Ethereum’s future is tied to DeFi, smart contracts, and institutional adoption. Bitcoin? It’s seen as digital gold - stable, but not growing.

What’s Next? The Ripple Effect

The SEC didn’t stop with Bitcoin and Ethereum. In October 2025, their orders explicitly opened the door for ‘a host of crypto asset ETPs.’ That means Solana, XRP, and others are next.

Hong Kong launched its first spot Solana ETF on October 23, 2025. It charges 0.99% - higher than Bitcoin or Ethereum, but still a sign of global momentum. Evernorth announced a $1 billion deal to acquire XRP for yield-generating strategies. That’s not a coincidence. It’s preparation.

The European Union is working on MiCA regulations, with ETFs expected by mid-2026. Singapore’s MAS is moving fast, too. The U.S. isn’t leading anymore - it’s catching up to global regulators who moved quicker.

Meanwhile, the SEC’s new chairman, Paul S. Atkins, made it clear: not all cryptocurrencies will qualify. ‘We’re not opening the floodgates,’ he said in October 2025. ‘We’re building a framework.’ That means future approvals will be case-by-case. Projects with clear utility, transparent governance, and strong security will get through. Others won’t.

Two giant spirit beings offer tokens to people in a meadow at twilight, as fireflies form crypto ticker symbols in the night sky.

Should You Invest?

If you’re thinking about adding Bitcoin or Ethereum to your portfolio, here’s what you need to know:

For long-term holders: Use in-kind transfers. Don’t sell. Swap directly into ETFs to avoid taxes.
For yield seekers: Go with Ethereum ETFs that stake. ETHE, FETH, and EETH are your best bets. Avoid the ones that don’t.
For cost-conscious investors: Fidelity’s FBTC and VanEck’s EETH have the lowest fees. Grayscale’s products are expensive - you’re paying for name recognition.
For tax clarity: Keep records of your original crypto purchases. Even if you didn’t sell, the IRS may still want to know your cost basis.

The market isn’t perfect. Fees are still high. Tax rules are unclear. And volatility hasn’t gone away. But the regulatory shift is real. For the first time, Bitcoin and Ethereum are treated like commodities - not securities. That’s not just a policy change. It’s a new financial reality.

What’s Still Unclear?

Even with all the progress, big questions remain:

Will the IRS ever clarify how in-kind transfers are taxed? Right now, it’s a gray area.
What happens if staking rewards are reclassified as income? That could change how Ethereum ETFs are structured.
Will other regulators follow the SEC’s lead - or will they move faster and leave the U.S. behind?
Can ETFs handle a market crash? If Bitcoin drops 40%, will the custody systems and liquidity providers hold up?

The answers to these questions will shape the next five years of crypto investing. But for now, one thing is certain: the days of crypto being an outsider asset are over.

Are Bitcoin and Ethereum ETFs safe?

They’re safer than holding crypto in a private wallet - but not risk-free. ETFs are regulated, custodyed by trusted institutions like BlackRock and Fidelity, and subject to SEC oversight. But they still track volatile assets. If Bitcoin drops 30%, your ETF will too. They’re not FDIC-insured. They’re not guaranteed. They’re just a more convenient way to own crypto.

Can I buy Ethereum ETFs on Robinhood or Fidelity?

Yes. All major brokerage platforms - including Robinhood, Fidelity, Charles Schwab, and TD Ameritrade - now offer spot Bitcoin and Ethereum ETFs. You can buy them like stocks. Just search for the ticker: IBIT for Bitcoin, ETHE or FETH for Ethereum.

Why do Ethereum ETFs have higher fees than Bitcoin ETFs?

Two reasons. First, Ethereum ETFs are newer and less competitive. Only a few providers offer them. Second, Grayscale’s ETHE charges 1.50% because it started as a trust and hasn’t lowered its fees despite converting to an ETF. Other providers like VanEck and Fidelity charge much less - as low as 0.15%. You’re paying for brand, not service.

Do Ethereum ETFs pay dividends?

Not dividends - but staking rewards. Ethereum’s network pays validators in new ETH for securing the chain. ETFs that participate in staking pass those rewards to shareholders, usually quarterly. Grayscale’s ETHE paid $127 million in rewards in Q3 2024. That’s not a dividend, but it works like one.

Is now a good time to invest in crypto ETFs?

It depends. If you believe Bitcoin and Ethereum will grow as institutional assets, then yes. The regulatory path is clear now. Fees are falling. Liquidity is rising. But crypto is still volatile. Don’t invest more than you can afford to lose. Use dollar-cost averaging. Start small. And always check the fees - they add up fast.

Asher Draycott

I'm a blockchain analyst and markets researcher who bridges crypto and equities. I advise startups and funds on token economics, exchange listings, and portfolio strategy, and I publish deep dives on coins, exchanges, and airdrop strategies. My goal is to translate complex on-chain signals into actionable insights for traders and long-term investors.