From staking income to control over assets, here’s how direct ETH ownership compares with staking-based ETFs.
Exposure to ether, the native asset of the Ethereum network, was once straightforward. Investors bought ETH through crypto platforms such as Coinbase or Robinhood or moved tokens into self-custody wallets like MetaMask, holding the asset directly and relying on price movements for returns.
That dynamic shifted with the advent of staking. By locking up ETH to support network operations, holders could earn rewards, effectively turning ether into a yield-generating asset alongside its role as a speculative investment.
As crypto markets have become more intertwined with traditional finance, investment choices have multiplied. Spot ether exchange-traded funds (ETFs) now offer price exposure through standard brokerage accounts, lowering the barrier for traditional investors while introducing new structural considerations.
More recently, some ether ETFs have added staking. These products aim to deliver both price exposure and income, allowing investors to earn staking rewards without managing wallets, validators, or on-chain processes.
Earlier this month, Grayscale became the first issuer to distribute staking rewards through its Ethereum Staking ETF (ETHE). The fund paid $0.083178 per share. With ETHE trading around $25.87 at the time, a $1,000 investment would have generated about $82.78 in staking income.
The development highlights a key decision facing investors: is it preferable to hold ETH directly, or to access it through a fund that stakes on their behalf?
Yield versus control
The distinction largely comes down to yield mechanics and asset control.
Investors who buy ETH directly through exchanges such as Coinbase or Robinhood own the underlying cryptocurrency. Gains and losses are tied to price movements, while the exchange serves as custodian. Those who opt to stake through Coinbase can earn annual rewards typically ranging from 3% to 5%, after commissions. Although the exchange manages the technical side of staking, investors retain flexibility to unstake, transfer, or deploy their ETH elsewhere.
Ether ETFs take a more hands-off approach. Investors buy shares through brokerage accounts, and the fund purchases and holds ETH. If staking is included, the fund stakes the assets and distributes rewards to shareholders, packaging yield generation within a regulated investment vehicle.
Fees meaningfully affect outcomes.
Grayscale’s Ethereum Trust (ETHE), for example, charges a 2.5% annual management fee regardless of performance. When staking is involved, an additional portion of rewards is typically paid to staking providers before distributions reach investors.
Coinbase, in contrast, does not charge a management fee for holding ETH but takes a commission of up to 35% on staking rewards. The company notes that this structure applies across several proof-of-stake assets, including ether, with lower rates available to subscribers of its premium services.
“There is no fee to stake your assets,” Coinbase states in its disclosures. “Coinbase takes a commission based on the rewards you receive from the network.”
As a result, effective staking yields are often higher for investors staking directly through exchanges, even after commissions. Still, ETFs may appeal to those seeking simplicity, regulatory clarity, and access through traditional brokerage infrastructure.
For such investors, staking ETFs resemble income-oriented funds, offering yield alongside price exposure—though the income is generated by blockchain activity rather than corporate earnings.
Risks and limitations
Convenience, however, comes with trade-offs. Staking rewards are not fixed.
Ethereum staking yields fluctuate based on network conditions and the total amount of ETH staked. Current annual yields are around 2.8%, according to CoinDesk data, but they can vary over time.
Operational risks also apply. If a validator underperforms or is penalized, an ETF could lose a portion of its staked ETH. Similar risks exist when staking through centralized exchanges, though direct holders retain greater flexibility to respond.
Access and control represent another point of divergence. Investors holding ETH directly—even via centralized platforms—can typically transfer tokens to wallets, unstake them, or use them in decentralized finance applications. ETF investors cannot. Their exposure is limited to buying and selling fund shares during market hours, with no ability to move or independently use the underlying ETH.
Ultimately, staking ETFs prioritize ease and familiarity, while direct ETH ownership offers greater autonomy and potentially higher net yields. The better choice depends on whether an investor values convenience—or control—more.
