Summary iShares Ethereum Trust ETF transforms ETH into a regulated financial instrument, offering only price appreciation minus a 0.25% sponsor fee. ETHA does not participate in staking, so holders forgo network yield, while direct ETH holders benefit from both price gains and staking rewards. ETHA offers brokerage accessibility, institutional custody, and tighter bid-ask spreads but lacks 24/7 liquidity and on-chain capital efficiency of native ETH. ETH is preferable for tech-savvy investors, tax-sheltered accounts, or flat markets, while ETHA suits those prioritizing regulatory oversight and brokerage integration. Introduction Owning the iShares Ethereum Trust ETF ( ETHA ) is different from owning Ethereum itself (Note: I will refer to Ethereum as ETH since that is the native crypto symbol for it. This should not be confused with the Mini ETF, whose ticker is ETH). The difference is not trivially one of convenience and custody. It is much more structural. Not only does ETHA package ETH inside a brokerage wrapper, but it also transforms a protocol asset into a regulated financial instrument. This changes many things. Ethereum is a network asset. You can trade Ethereum 24/7, all day. ETH does proof-of-stake (PoS) validation. Its return has two components: what it gains from price appreciation and the PoS yield. ETHA, on the other hand, is a Delaware trust . It holds ETH, and returns come only from price performance, after expenses. Like any normal market security, it trades only during market hours. There’s a 0.25% sponsor fee, and ETHA has neither any distributable income nor is involved in staking. It tracks the CME CF Ether-Dollar Reference Rate—New York Variant, a regulated benchmark rate. I mentioned staking, but the differences go beyond that. These differences impact where returns come from. As we will also discuss shortly, they have an effect on volatility, counterparty exposure, and how productive capital remains when idle. If you are a direct ETH investor, you get both risks and rewards at the protocol level. You get no protocol participation risks if you are owning ETHA, but you get other benefits. These include benefits due to ETHA’s custodial structure, authorized participants, involvement of regulators in its oversight, and basic brokerage access. Return Composition: Price-Only vs. Network-Productive Capital One key way ETH is more productive than ETHA is because it does network validation under proof-of-stake. This produces a reward in token for its holder. So you are not just sitting and waiting for price appreciation—as ETHA does—but you are actually working your investment. ETHA doesn’t do this because it wants to remain within a strict regulatory framework. It also wants to avoid certain operational and legal risks. These risks are things like a strict lock-up period for ETH, slashing risks, and so on that hurt ETH’s liquidity. So ETHA relies only on price appreciation for its returns. ETHA sponsor fees came to $11.84 million in the first nine months of 2025. That is against an AUM of $6.4 billion. That said, those fees do come out of the trust’s ether holdings, so, over time, they reduce NAV. ETH itself is highly volatile, and price appreciation of 70-100% in a year could occur. If ETH goes up 80% in a year, a 0.25% fee and even the staking yield could be marginal relative to those gains. An investor wanting to avoid the complexity of direct Ethereum investing may still be able to successfully participate in its price gains by simply holding ETHA. However, in flat markets, the fee starts to bite. So, say in a flat market ETH only goes up 6% annually, and the staking yield is 3%; then a direct staker is making 9% before costs. ETHA’s return during the same period would be 6% minus the fees, or 5.75%. So the annual spread is 3.25%, which could become a substantial difference over longer periods. Tax Structure: Income Recognition vs. Deferred Realization There are key differences in how the taxman treats these two sources of returns. Staking rewards of direct ETH holders are treated as ordinary income. So, whether you sell ETH or not, you pay taxes. Longer-term appreciation from those rewarded tokens becomes capital gains, so you pay capital gains tax on those too. For ETHA holders, the tax situation is different . The ETF does not distribute income and does not stake. So you pay no periodic taxes. You only pay taxes when you sell ETHA. Until then, gains or losses are unrealized. In the earlier example, only the staking portion of the 3.25% pre-tax spread is taxed annually, depending on your tax bracket. If you are paying 24% taxes, the spread comes to 2.53%. At 37%, it comes to 2.14%. This is still a gap, but it isn’t as much as earlier. So we see deferral has some economic value for taxable investors. For retirement accounts, however, tax-sheltered accounts paying 0% taxes on income, the advantage disappears, and ETH becomes more rewarding. Liquidity & Market Structure: 24/7 Protocol Asset vs. Exchange-Hour Instrument Ethereum trades across many exchanges around the world. It goes up and down in real time. Unlike ETHA, it does not keep US market hours only. When US markets close, ETHA trading stops, but ETH trading doesn’t. This is a crucial difference. So if you are holding ETHA, and the underlying ETH makes major weekend moves, you can’t get into the game until Monday. This happens routinely—crypto is notorious for making sharp moves outside US trading hours. Another point: while ETHA does have a large asset base of between $6 billion and $9 billion (the difference is based on how it is being reported), ETH trades across dozens of global exchanges with $19-20 billion in daily turnover . That’s a 2-3x multiple of ETHA. While these are constraints on ETHA, there are some benefits to them. One of these is that during trading hours, bid-ask spreads are tighter for ETHA. This helps brokerage investors with more predictable execution and settlement. Counterparty & Custody Risk: Protocol Risk vs. Institutional Risk Native ETH has various risks peculiar to protocol-level assets. Investors need to manage private keys, which could cause losses, especially if an asset is self-custodial. Unintentional improper validator behaviour could make you lose rewards. Intentional or malicious behaviour, although rare, could cause slashing penalties. Another type of protocol-level risk is exposure to smart contracts. Here, a software bug could exploit drained funds. In some situations, especially outside the secure ether ecosystem, you could even see the staking pool contract getting compromised. In a regulated setup like ETHA, these risks do not exist. Here, your ETF’s ether is held directly by a custodian (here, Coinbase Prime), so there are institutional safeguards. However, risks are not eliminated entirely; they just shift somewhere else. Here, with ETHA, you must rely on sponsors, custodians, and authorized participants. Each of these elements must work properly in the capital market for the account to clear and settle correctly. Capital Efficiency & Financial Integration: Brokerage Asset vs. On-Chain Asset Ethereum is an asset that can be made to work. It can be productive. You can deploy it in a decentralized manner and use it as collateral in network lending protocols. It can be added to liquidity pools or staked. You can basically use your owned on-chain ETH to earn more ETH. This is not something you can do with ETHA. You do hold beneficial ownership in the trust that holds ETH, but what you own is not ETH but this trust. You cannot use those shares within decentralized systems. You cannot stake them, lend them on-chain, or deploy them in smart contracts. On the other hand, you can margin ETHA on brokerage accounts, you can use it as collateral for ordinary loans, and there’s a busy option market so you can write covered calls, buy protective puts, and so on. In short, you can do financial engineering with the ETH-backed ETF that you couldn’t standardly do with native ETH (there are non-standard ways to do some of these things). So it is not a simple trade-off on yield. You are also exchanging on-chain deployability for the flexibility of brokerage holding. Conclusion The foregoing discussion should have made clear who should go native with ETH and who should stick to ETHA. Broadly, there are three situations where owning ETH is more profitable. One, if you are highly tech-savvy and know how to go on the network, manage private keys, and stake your coins, ETH is for you. Two, if you are putting your money in tax-sheltered accounts, ETHA offers no tax advantage but only the fee drag. Third, if ether is going through a sustained flat market, then the price advantage of ETH outweighs the structural advantages of ETHA. In all these situations, owning ETH is the better deal.
