Bitcoin and Ethereum ETF Approvals in the US: What Changed and What It Means for Investors

For over a decade, the idea of buying Bitcoin or Ethereum through a traditional brokerage account felt like science fiction. The SEC rejected more than a dozen Bitcoin ETF applications since 2013. Investors either had to buy crypto directly on exchanges, store it in wallets, or rely on risky trust products like Grayscale’s GBTC. Then, in January 2024, everything flipped. The SEC approved the first spot Bitcoin ETFs. Six months later, in July 2024, they did it again-this time for Ethereum. By October 2025, the market had evolved again, with a major structural change that made these ETFs far more efficient. This isn’t just another product launch. It’s the moment crypto stopped being a fringe asset and became part of the mainstream financial system.

How the SEC Changed Its Mind

The turning point wasn’t a vote or a press release. It was a court ruling. In August 2023, the D.C. Circuit Court said the SEC had been inconsistent in rejecting Bitcoin ETF applications. They approved one Bitcoin futures ETF in 2021 but kept denying spot ETFs-even though both tracked the same asset. The court called it arbitrary. That forced the SEC’s hand. On January 10, 2024, they approved six spot Bitcoin ETFs, including BlackRock’s IBIT and Fidelity’s FBTC. The market reacted instantly. IBIT hit $4.6 billion in assets within its first week. It wasn’t luck. It was demand. Millions of people wanted a simple, regulated way to own Bitcoin without dealing with private keys or exchange hacks.

Then came Ethereum. The SEC waited. They had more questions. Ethereum isn’t just digital gold. It’s a platform for smart contracts, DeFi, and NFTs. Could staking rewards be considered securities? Could the network’s consensus mechanism be regulated like a stock? On July 23, 2024, they approved 11 spot Ethereum ETFs. BlackRock, Fidelity, VanEck, Ark, and Grayscale all launched products. The approval signaled something bigger: the SEC now treats Ethereum as its own asset class-not just a Bitcoin copycat.

What’s Different About Bitcoin and Ethereum ETFs?

At first glance, Bitcoin and Ethereum ETFs look the same. You buy shares. You get exposure. But underneath, they’re very different.

Bitcoin ETFs are simple. They hold Bitcoin. No staking. No rewards. Just storage. All 11 Bitcoin ETFs use the same cash-only model at launch. Investors paid cash to create shares, and got cash back when redeeming. That created a problem: every time shares were created or redeemed, the ETF had to buy or sell Bitcoin on the open market. That meant price slippage, higher fees, and unnecessary taxes.

Ethereum ETFs added complexity. Ethereum runs on proof-of-stake. That means ETH holders can earn rewards by locking up their coins to help secure the network. Grayscale’s ETHE ETF chose to participate in staking. As of September 2025, it had staked 4.2% of its 3.1 million ETH holdings. That generated $127 million in quarterly rewards, which were paid out to shareholders. Other Ethereum ETFs didn’t stake at all. VanEck’s EETH, for example, held ETH without staking. So if you bought ETHE, you got extra income. If you bought EETH, you didn’t. That’s a big decision for investors.

Fees reflect the difference too. Bitcoin ETFs average 0.25% in annual fees. Fidelity’s FBTC charges 0.00%. Grayscale’s GBTC charges 0.90%. Ethereum ETFs are pricier. Average fee: 0.35%. VanEck’s EETH is 0.15%. Grayscale’s ETHE? 1.50%. That’s because ETHE was originally a trust. Converting it to an ETF cost money. Investors paid for that legacy structure.

The Game-Changer: In-Kind Creation (July 2025)

The biggest update didn’t come with a new ETF. It came with a rule change. On July 29, 2025, the SEC approved in-kind creation and redemption for crypto ETFs. That means authorized participants can now swap actual Bitcoin or Ethereum for ETF shares-no cash needed.

This is huge. Before, if you owned 100 BTC and wanted to invest in IBIT, you had to sell your Bitcoin, send cash to the ETF provider, and let them buy Bitcoin on your behalf. That triggered a taxable event. Now, you can hand over your 100 BTC directly. The ETF gives you shares. No sale. No tax. No slippage. It’s how gold ETFs like GLD have worked since 2004.

By October 2025, BlackRock had processed over $3 billion in in-kind conversions. Bitwise and Galaxy Digital saw 47% and 63% quarterly growth in client requests for this option. Institutional investors, especially those with large Bitcoin holdings, now use ETFs for estate planning and collateral. A Bloomberg survey found 78% of institutional investors prefer ETFs for easier asset management.

Cost savings are real. The SEC estimates in-kind processing cuts ETF operational costs by 0.15% to 0.25% annually. For a $100 billion market, that’s $150-250 million saved each year. Those savings will eventually lower fees for everyday investors.

Market Performance: Bitcoin vs. Ethereum

The numbers tell a clear story. As of September 30, 2025:

• Spot Bitcoin ETFs held $54.3 billion in assets. BlackRock’s IBIT led with $16.9 billion (31.2% market share).
• Spot Ethereum ETFs held $18.7 billion. Grayscale’s ETHE led with $5.1 billion (27.3% share).

But the trends are diverging. In Q3 2025, Bitcoin ETFs saw $1.2 billion in net outflows. Why? Rising interest rates made bonds and Treasuries more attractive. Investors moved money out of riskier assets. Ethereum ETFs, meanwhile, saw $478 million in net inflows. Why? Institutional interest in DeFi and staking rewards grew. Ethereum isn’t just a store of value-it’s a yield-generating asset.

Even the premiums tell a story. Bitcoin ETFs trade at 0.08% above their net asset value (NAV). Ethereum ETFs trade at 0.23%. That means investors are willing to pay more for Ethereum exposure. Demand is stronger.

What’s Next? Solana, XRP, and Global Expansion

The SEC didn’t stop at Bitcoin and Ethereum. Their October 2025 orders explicitly allow in-kind processing for “a host of crypto asset ETPs.” That’s code for: more ETFs are coming.

Already, the Hong Kong Stock Exchange launched the first spot Solana ETF on October 23, 2025, charging 0.99% in fees. Singapore and the EU are expected to follow by mid-2026. In the UK, the FCA lifted its ban on crypto ETNs, letting 21Shares, Bitwise, and WisdomTree offer physical Bitcoin and Ether ETPs in ISAs.

Evernorth’s $1 billion deal to acquire XRP for DeFi yield strategies signals a potential XRP ETF is on the horizon. The SEC hasn’t approved it yet, but the framework is now in place. If Ethereum can get approved, why not XRP? The SEC says it’s case-by-case. But the precedent is set.

Who Benefits? Who’s at Risk?

The winners are clear: retail investors, institutions, and ETF providers. Now, anyone with a Fidelity or Charles Schwab account can own Bitcoin or Ethereum with the same ease as Apple stock. Fees are falling. Liquidity is rising. Tax efficiency is improving.

But risks remain. Harvard Law’s John Coates warned that staking Ethereum introduces systemic risk. If 68% of Ethereum’s security relies on staked ETH, and ETFs start locking up huge amounts of it, what happens if the market crashes? Could staking rewards disappear? Could validators be hacked? The SEC hasn’t fully answered those questions.

Also, Grayscale’s 1.50% fee on ETHE is still a red flag. Most investors don’t need to pay that much. VanEck’s EETH offers the same exposure at 0.15%. The market is punishing high fees. If Grayscale doesn’t lower them, investors will leave.

And tax complexity? It’s still messy. In-kind conversions avoid capital gains, but the IRS hasn’t clarified how to report them. Coinbase’s Trustpilot reviews show 28% of users struggled with tax documentation. You still need a good accountant.

What Should You Do Now?

If you’re new to crypto, start simple. Use a low-fee Bitcoin ETF like Fidelity’s FBTC (0.00%) or BlackRock’s IBIT (0.12%). You get exposure without the hassle.

If you want yield, consider Ethereum ETFs that stake. Grayscale’s ETHE pays quarterly rewards. VanEck’s EETH doesn’t. Pick based on your goals. Don’t pay 1.50% if you can pay 0.15% for the same asset.

If you already hold Bitcoin or Ethereum in a wallet, consider in-kind conversion. Talk to your broker. If they support it, swap your crypto for ETF shares. Save on taxes. Simplify your portfolio.

Don’t chase hype. Bitcoin ETFs had outflows in Q3 2025. Ethereum ETFs had inflows. Markets move. Don’t panic. This isn’t a sprint. It’s a marathon.

What’s Still Unclear?

The SEC hasn’t defined what makes a cryptocurrency eligible for an ETF. Bitcoin and Ethereum are clear. What about Solana? Cardano? Dogecoin? The SEC says it’s case-by-case. That’s frustrating. But it’s also a sign they’re being cautious. They’re not going to approve everything.

Staking rewards are still a gray area. Are they dividends? Interest? Income? The IRS hasn’t said. Tax software doesn’t fully support it yet. You’ll need to track rewards manually.

Will ETFs dilute the decentralization of Bitcoin and Ethereum? Some argue yes. If institutions hold most of the supply through ETFs, who controls the network? That’s a philosophical debate. But for now, the market says: this is progress.