Original Author: Nicky, Foresight News
August 12 - According to CoinDesk, Fidelity is preparing to add a staking and quarterly cash dividend mechanism to its Fidelity Ethereum Fund (FETH). According to the amended registration statement, the fund can stake up to 100% of its Ethereum holdings, with no minimum ratio set, while retaining a portion of ETH for redemption and liquidity needs.
The proposal shows that Fidelity will retain 85% of the gross staking rewards, distributing the remaining 15% to the fund sponsor, custodian, and node operators, including Blockdaemon, Figment, and Galaxy. Net staking rewards will first cover fund operating expenses, with the remainder used for quarterly cash dividends. Fidelity stated that it may also sell some ETH to raise dividend funds.
FETH is one of the important products among the US spot Ethereum ETFs. According to CoinGlass data, as of mid-August, FETH's assets under management are approximately $1.34 billion, ranking fourth among similar products. The top three are BlackRock's iShares Ethereum Trust ETF (ETHA) at approximately $7.21 billion, Grayscale Ethereum Staking ETF (ETHE) at approximately $3.46 billion, and Grayscale Ethereum Staking Mini ETF (ETH) at approximately $1.27 billion.
Fidelity's move is not an industry precedent. Previously, Grayscale and 21Shares have added staking functions to their Ethereum funds, while BlackRock opted to launch a separate staking product, the iShares Staked Ethereum Trust ETF (ETHB). According to Grayscale's official data, its ETHE currently has a gross staking yield of 2.75%, a net staking yield of 2.11%, a staking rate of about 80.51%, and cumulative net dollar rewards of approximately $27.3 million.
Among the products that have already paid dividends, ETHE's latest dividend per share is about $0.0217, and ETHB's dividend per share is about $0.0325, with dividend frequencies mostly monthly or at least quarterly. The net staking yield for the ETH Mini Trust is about 2.59%, and BlackRock's ETHB's 30-day staking reward rate is about 1.84%.
According to data from the Ethereum website, the Ethereum network currently has approximately 41.85 million ETH in staking, accounting for 33% of the supply, with an estimated annualized staking yield of about 2.6%. The net yield for ETF products is typically lower than this level because they need to deduct staking service provider shares and management fees, and funds usually only stake a portion of assets to maintain a liquidity buffer.
Taking Grayscale's ETHE as an example, its gross yield of 2.75% drops to a net yield of 2.11% after deducting approximately 23% for sponsor and custodian shares. Fidelity plans to retain 85% of the gross rewards, meaning the net returns investors actually receive will depend on fund fees, the staking ratio, and node operator performance, with the net yield expected to fall in the range of 1.5% to 2%.
FETH was established in October 2023 and listed on the Cboe BZX Exchange in July 2024 as one of the first U.S. spot Ethereum ETFs. FETH has an expense ratio of 0.25%, with custody handled by Fidelity Digital Assets. Since its listing, the fund has competed in the market with the advantages of low fees and self-custody.
Fidelity's entry may further intensify the head-gathering effect in the Ethereum ETF market. Products that already offer staking rewards, such as those from Grayscale, 21Shares, and BlackRock, are in leading industry positions with strong brand recognition and liquidity advantages. The additional returns from the staking function make these products more attractive to investors, potentially accelerating capital outflow from smaller ETFs that offer no staking rewards.
A similar situation has already occurred in the Bitcoin ETF market. Hashdex's Bitcoin ETF DEFI, with persistently low assets under management (AUM) of about $14.7 million before closure, announced liquidation in August this year, becoming the first U.S. spot Bitcoin ETF to liquidate. The competitive landscape in the Ethereum ETF market is similarly highly concentrated. According to CoinGlass data, the current Ethereum ETF market comprises 12 funds with total AUM of approximately $13.72 billion. The top five ETFs have an AUM of approximately $13.48 billion, accounting for 98.25% of the entire market. The top five products occupy the vast majority of market share, putting increasing survival pressure on funds lower in the rankings if they cannot provide differentiated yield features.
