Original author: Nicky, Foresight News
On August 12, according to CoinDesk, Fidelity is preparing to add staking and quarterly cash distributions to its Fidelity Ethereum Fund (FETH). According to the amended registration statement, the fund may stake up to 100% of its Ethereum holdings, with no minimum requirement, while retaining a portion of ETH for redemptions and liquidity needs.
The plan shows that Fidelity will retain 85% of gross staking yields, with the remaining 15% allocated to the fund sponsor, custodian, and node operators, including Blockdaemon, Figment, and Galaxy. Net staking yields will first cover fund operating expenses, with any surplus distributed as quarterly cash dividends. Fidelity stated that it may also sell a portion of its ETH to fund dividends.
FETH is one of the key products among U.S. spot Ethereum ETFs. According to CoinGlass data, as of mid-August, FETH had an asset under management of approximately $1.34 billion, ranking fourth among similar products. The top three are iShares Ethereum Trust ETF (ETHA) by BlackRock 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 unprecedented in the industry. Previously, Grayscale and 21Shares have added staking functionality to their Ethereum funds, while BlackRock opted to launch a standalone staking product, the iShares Staked Ethereum Trust ETF (ETHB). According to official data from Grayscale, ETHE currently has a gross staking yield of 2.75%, a net staking yield of 2.11%, a staking rate of approximately 80.51%, and cumulative net USD rewards of about $27.3 million.
Among products with realized distributions, ETHE’s most recent dividend per share was approximately $0.0217, while ETHB’s was approximately $0.0325 per share, with distributions typically occurring monthly or at least quarterly. The net staking yield for the ETH Mini Trust is approximately 2.59%, and BlackRock’s ETHB has a 30-day staking reward rate of approximately 1.84%.
According to data from the Ethereum website, approximately 41.85 million ETH are currently staked on the Ethereum network, accounting for 33% of the supply, with an annualized staking yield of about 2.6%. The net yield of ETF products is typically lower than this, as it deducts staking service provider fees and management expenses, and funds often stake only a portion of their assets to maintain a liquidity buffer.
Taking Grayscale’s ETHE as an example, its gross yield of 2.75% is reduced to a net yield of 2.11% after deducting approximately 23% in sponsor and custodian fees. Fidelity plans to retain 85% of the gross yield, meaning the actual net yield received by investors will depend on fund fees, staking ratios, and node operator performance, with an expected net yield 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 spot Ethereum ETFs in the United States. With an expense ratio of 0.25% and custody provided by Fidelity Digital Assets, the fund has competed in the market since its launch by offering low fees and self-custody advantages.
Fidelity's entry may further intensify the market concentration effect in the Ethereum ETF space. Products currently offering staking yields, such as Grayscale, 21Shares, and BlackRock, are already at the industry's forefront, benefiting from strong brand recognition and liquidity advantages. The additional yield from staking makes these products more attractive to investors, potentially accelerating capital outflows from smaller ETFs that do not offer staking rewards.
A similar situation has occurred in the Bitcoin ETF market. Hashdex’s Bitcoin ETF, DEFI, which had been struggling with low assets under management for an extended period, announced its closure in August this year with assets under management of approximately $14.7 million, becoming the first spot Bitcoin ETF to liquidate in the United States. The Ethereum ETF market exhibits a similarly concentrated competitive landscape: according to CoinGlass data, there are currently 12 Ethereum ETFs with a combined assets under management of approximately $13.72 billion. The top five ETFs account for about $13.48 billion in assets, representing 98.25% of the entire market. With the majority of market share dominated by the top five products, funds with smaller asset sizes will face increased pressure to survive unless they can offer differentiated return features.