- VanEck plans to close its Ethereum futures ETF, citing liquidity and performance risks tied to Ethereum futures contracts.
- Shareholders can sell Ethereum futures ETF shares until September 16, 2024, with cash payouts expected by September 23, 2024.
- Contango risks in Ethereum futures markets influenced VanEck’s decision to liquidate its Ethereum futures ETF amid market uncertainty.
VanEck, a prominent U.S. ETF issuer, announced today that it will close and liquidate its Ethereum futures ETF (EFUT). This decision follows the approval of its Ethereum spot ETP, a shift in the company’s approach to cryptocurrency investments.
This similars VanEck’s closure of its Bitcoin futures ETF earlier this year after the approval of its Bitcoin spot ETF in January. The liquidation of EFUT comes as VanEck evaluates various factors that influence its ETF offerings, including performance and investor interest.
Liquidation Timeline and Shareholder Impact
The Board of Trustees for VanEck ETF Trust approved the liquidation of the EFUT on September 5, 2024. Shareholders can continue selling their shares on the listing exchange until the market closes on September 16, 2024. After this date, EFUT shares will be de-listed and will no longer trade.
VanEck has scheduled the fund’s liquidation date for approximately September 23, 2024. Notably, shareholders holding shares at the time of liquidation will receive a cash distribution equal to the net asset value of their shares. These proceeds are expected to be sent to shareholders by September 23.
Furthermore, shareholders may also receive a final distribution of any net income or capital gains earned by the fund before its liquidation. The tax implications of these distributions will be provided in year-end tax reports, with shareholders likely recognizing a capital gain or loss depending on their investment basis.
Reasons for the Fund’s Closure
VanEck highlighted several operational considerations behind the decision to liquidate the EFUT. Among these were concerns about liquidity, market volatility, and performance risks associated with Ethereum futures contracts. Futures contracts, particularly in the Ethereum market, carry additional risks due to market liquidity and the complexity of futures basis and contango.
Additionally, the development of Ethereum’s network and its regulatory environment remain uncertain, which adds further unpredictability to the fund’s performance. This uncertainty, combined with higher margin requirements for ETH futures on the Chicago Mercantile Exchange (CME), factored into VanEck’s decision to close the fund.
Risks in Ethereum Futures Investments
Investing in Ethereum futures involves risks, including heightened volatility and liquidity challenges. Futures contracts differ from direct asset investments, as they are subject to specific conditions like collateral requirements and daily limits.
In Ethereum futures markets, the risk of contango, where future prices exceed spot prices, can negatively impact fund performance. VanEck emphasized these risks as key factors in its decision to shutter the EFUT, noting that extended periods of contango could cause sustained losses.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
