Fidelity Unveils New Ethereum Index Fund

Ethereum is the community-run technology powering the cryptocurrency ether, according to the website ethereum.org. 


Dreamstime

Never mind the crypto bear market. Fidelity Investments is launching the Fidelity Ethereum Index Fund, according to an Oct. 4 filing with the Securities and Exchange Commission. The fund currently has $5 million in assets.

We have continued to see client demand for exposure to digital assets beyond Bitcoin, a Fidelity spokesperson said in an emailed statement to Barrons Advisor.

The fund is part of the Fidelity Digital Assets division, which was formed in 2018 to provide custody and trading services for crypto investments. Through this platform, Fidelity launched the Wise Origin Bitcoin Index Fund I in 2020.

Like its older cousin, the Fidelity Ethereum Index Fund is available to accredited investors and the minimum investment is $50,000. This is not an exchange-traded fund (ETF). Rather, it is structured as a traditional limited partnership and investment purchases are made through a private placement.

The benchmark for the fund is the Fidelity Ethereum Index PR (FIDETHP). It is constructed using


Ethereum

price feeds from approved exchanges and reflects the performance of the cryptocurrency in U.S. dollars. The index uses a volume-weighted median price method based on five-minute increments to determine the Ethereum price composite.

The cryptocurrency for Ethereum is called Ether or ETH. Its the second largest behind Bitcoin and the market value is roughly $160 billion. A key attraction for Ethereum is the ability to create smart contracts. This is software to build applications, games, and NFTs (nonfungible tokens).

Last month, the Ethereum network underwent a major upgrade, which was called The Merge. This is expected to result in improved security and much lower electricity usage.

However, this year Ether has suffered major losses along with many other crypto assets. Its off about 63%, trading Wednesday at $1,355, down from $3,768 at the start of the year.

Fidelity has been quite active in the crypto market, especially in comparison to many financial services firms. In April, Fidelity announced that it was rolling out Bitcoin offerings for 401(k) plans.

In addition, Fidelity has partnered with Citadel Securities,


Virtu Financial

and


Charles Schwab

to build a cryptocurrency trading platform. The system is expected to launch later this year or early 2023.

As the marketplace for digital assets grows, Fidelity recognizes the need for a diverse set of products and solutions that help customers gain exposure in a manner that aligns with their distinct financial objectives and risk tolerance, a Fidelity spokesperson said.

Tom Taulli is a freelance writer, author, and former broker. He is also the author of the book, The Personal Finance Guide for Tech Professionals.