5 min läsningPassive income with Ethereum
In September 2022, Ethereum - the second-largest cryptocurrency network behind Bitcoin with a market cap of $342m (source: CoinMarketCap as of 15/02/2024) - transitioned to a “Proof of Stake” (PoS) consensus mechanism. This move away from the energy-intensive Proof of Work mechanism used by other cryptocurrencies like Bitcoin drastically reduced its environmental footprint overnight, establishing Ethereum as a more sustainable and efficient blockchain network. It also introduced the process of “Staking” to the Ethereum network.
Staking is a process that involves depositing tokens to support the network’s operations and security, and has become a prominent feature in PoS blockchains like Ethereum. Participants are rewarded, usually in the network's native token, for their contribution to maintaining and securing the network.This means holders of Ether (ETH) can earn a passive income.
Accessing staking rewards
Investors looking for exposure to Ethereum’s staking rewards have several options:
If holding ETH tokens directly, individuals can either:
Become a full validator,
Joining a staking pool, or
Using a staking service provided by a cryptocurrency exchange.
However, these methods can be complex and each comes with its own set of benefits and associated risks.
An approach growing in popularity in Europe is to invest in an Exchange Traded Product (ETP) that tracks the price of Ethereum, and includes staking rewards built into the performance of the product. Learn more about Staked ETPs here.
For example, CoinShares has recently added staking rewards to its flagship physically-backed Ethereum ETP.
Introducing CoinShares Physical Staked Ethereum
CoinShares’ Physical Ethereum ETP now offers a seamless solution for investors looking to gain exposure to staking rewards. Investors can now enjoy the convenience of having their ETH price exposure and subsequent ETH rewards wrapped up into the same single product, allowing them to manage their entire Ethereum exposure within the same portfolio as their other stocks and shares.
Unlike other ETPs - which charge management fees and deliver variable levels of rewards with little insight into the underlying methodology - CoinShares’ Physical Staked Ethereum stands out in the market with its zero management fees, transparent and predictable rewards delivered daily, and full physical backing. Parent company CoinShares, which has a total of $4.7bn USD assets under management as of 15 February 2024, and also boasts a strong track record in managing crypto assets, having been active in the market since 2014.
Key considerations & risks
As with any investment, it is important to be aware of the risks involved in trading crypto ETPs.
Despite being physically-backed by ether, investors’ capital is at risk and investors may lose part or all of their investment, as investors are fully exposed to the price of Ethereum which has been known to experience large gains and losses in its relatively short history.
Crypto ETPs are generally structured as debt securities, and not as equities.
The bid/offer prices of the ETP on an exchange will likely differ from the trading price of the ether
Past performance is not an indicator of future performance and investors should always seek professional advice to ensure an allocation to crypto fits with their overall goals and objectives.
Additionally, when choosing a staked crypto ETP, investors should always do their due diligence on management fees, the transparency of the staking rewards, the accrual frequency, and how risks like illiquidity and slashing are mitigated. For more information about selecting staked crypto ETPs, check out our dedicated article.
How to invest in CoinShares Physical Staked Ethereum
CoinShares Physical Staked Ethereum is available for purchase on several online investment platforms. Refer to our How to Buy section to see if your preferred broker carries CoinShares’ products. Then. all you need to do is follow these simple steps in your broker’s account or app:
Search for the product name, ISIN code, or ticker symbol (all featured on the CoinShares’ website) of your chosen ETP.
Choose the notional amount or number of securities you wish to buy.
Place the execution order.
You can then monitor your Ethereum exposure through your broker and wait for the staking rewards to add up over time, with the added assurance of CoinShares’ industry-leading expertise and robust product structure.
