Staking was once regarded as a key advantage for Ethereum exchange-traded funds, yet early data from BlackRock suggests that investors continue to gravitate toward its original, non-staking product.
When US spot Ethereum ETFs debuted in July 2024, the exclusion of staking was widely regarded as a significant structural drawback. Investors who purchased these funds gained exposure to ether’s price movements but forfeited the rewards available to those who committed their tokens to securing the Ethereum network.
At the time, JPMorgan identified the omission of staking from ETF filings as a factor contributing to expected weaker demand relative to Bitcoin funds. BitMEX Research echoed this view, arguing that institutional investors could find non-staking products less compelling, while Galaxy Digital estimated that forgoing staking represented a material opportunity cost for ETF holders.
BlackRock now provides a real-world test of that argument.
Its iShares Ethereum Trust ETF (ETHA) offers direct exposure to ether without staking. The newer iShares Staked Ethereum Trust ETF (ETHB) stakes a portion of its holdings and distributes a share of the resulting yield to shareholders.
So far, the addition of yield has not altered the established hierarchy.
ETHA held approximately $8.96 billion in net assets on September 11, compared with roughly $1.05 billion for ETHB, according to BlackRock fund data.
The gap is far more pronounced in secondary-market trading activity. ETHA generated an estimated $1.86 billion in share turnover that day, calculated from volume multiplied by its closing price — approximately 30 times ETHB’s $61.8 million.
ETHB is returning capital to investors. The fund declared a distribution of $0.036487 per share payable on September 10, after commencing staking rewards in May.
Nevertheless, ETHA attracted $148.8 million in net inflows on September 11, compared with $18.3 million for ETHB, per Farside Investors data.
This comparison carries an important caveat. ETHA has had considerably more time to build assets, trading relationships, and institutional adoption, while ETHB is still establishing its track record. Its roughly $1 billion asset base nonetheless represents meaningful demand for a newer product.
Even so, ETHA’s continued inflows following the availability of staking income challenge the stronger version of the thesis that absent yield was the primary constraint on Ethereum ETF demand.
Staking Removes One Handicap, but ETHA Retains Its Head Start
ETHB addresses much of the opportunity-cost problem that underpinned criticism of the original Ethereum ETF structure. However, it cannot immediately replicate the liquidity that ETHA has accumulated since becoming one of the first US spot Ethereum ETFs.
BlackRock reported a 30-day median bid-ask spread of 0.05% for ETHA as of September 11, compared with 0.06% for ETHB. While the difference is modest, the far wider disparity in trading activity gives institutions substantially greater capacity to enter and exit larger ETHA positions.
Daily flows have yet to reveal a sustained shift toward the staking product.
Both funds recorded no net flows on September 8 and drew capital on September 9. ETHA experienced an outflow on September 10 while ETHB gained assets, but both returned to inflows the following day, with ETHA attracting significantly more money.
These movements cannot establish whether individual investors are rotating between the two products. ETF flow data identify creations and redemptions at the fund level but do not reveal whether an investor selling ETHA subsequently used the proceeds to purchase ETHB.
This distinction matters if staking eventually shifts the competitive balance. A sustained period of ETHB creations accompanied by ETHA redemptions would provide far stronger evidence that investors are actively exchanging simpler exposure for yield-bearing exposure.
Yield Introduces Costs and an Additional Layer of Liquidity Management
Staking also gives ETHB a more complex economic profile than simply layering yield on top of ETHA’s offering.
Approximately 75.85% of ETHB’s ether was classified as staked as of September 10, while roughly 24.15% remained unstaked. The unstaked portion provides liquidity for fund operations and redemptions without requiring BlackRock to wait for ether to exit Ethereum’s staking process.
Investors also face two separate layers of charges.
ETHB carries a standard annual sponsor fee of 0.25%, identical to ETHA’s headline rate, although a temporary waiver reduces the fee to 0.12% on its first $2.5 billion of assets for 12 months beginning March 12.
Staking rewards carry an additional cost. An April prospectus supplement sets the aggregate staking fee at 10% of gross staking consideration, reduced from an earlier 18%.
The two fees apply to different bases. The sponsor fee is assessed against fund assets, while the staking fee is deducted from rewards generated by participating in Ethereum’s proof-of-stake network.
Distributions are also conditional rather than a fixed yield. BlackRock can consider staking proceeds received, legal requirements, and the fund’s operational and liquidity needs when determining payments.
The structure introduces additional redemption considerations. Under stressed conditions, ETHB’s prospectus permits delayed settlement or cash-only redemptions when staking exit times or available liquidity complicate ordinary settlement.
These trade-offs subject the staking thesis to a tougher test than whether investors simply appreciate receiving additional income.
ETHB must generate sufficient after-fee value to persuade investors to choose a younger, less-traded vehicle over an incumbent with nearly $9 billion in assets.
The next critical signal will be whether ETHB can convert its distribution feature into sustained creations rather than episodic demand around payouts. If that occurs while ETHA begins losing assets, the staking thesis will have considerably stronger support.
Until then, BlackRock can accommodate both preferences: investors prioritizing ETHA’s established liquidity and those willing to accept additional complexity to earn staking income through ETHB.
