Crypto ETFs that include staking can enhance returns, though they won’t suit every investor.

From yield potential to custody risks, here’s how holding ETH directly stacks up against staking ETFs for different investor goals.

For years, investing in ether—the native token of the Ethereum network—followed a relatively straightforward playbook. Investors bought ETH on platforms such as Coinbase or Robinhood, or moved it into self-custody wallets like MetaMask, gaining direct exposure to price movements.

That changed with the rise of staking, a process that allows holders to lock up ETH to help secure the network and earn rewards in return. For many investors, staking introduced a way to generate passive income while maintaining long-term exposure to Ethereum’s price.

As crypto has edged closer to traditional finance, however, the menu of options has expanded. Spot exchange-traded funds (ETFs) tracking ether prices now sit alongside direct ownership, offering a more familiar structure for traditional investors—but also forcing new trade-offs.

Adding another layer, some ether ETFs now include staking. These products not only mirror ETH’s price performance but also pass along staking rewards, blending capital appreciation with income generation inside a brokerage-friendly wrapper.

Earlier this month, crypto asset manager Grayscale became the first issuer to distribute staking rewards through its Ethereum Staking ETF (ETHE). Shareholders received $0.083178 per share. At the time, with ETHE trading near $25.87, a $1,000 investment would have generated roughly $82.78 in staking income.

That development sharpens a key question for investors: Is it better to hold ETH directly—or gain exposure through an ETF that stakes on your behalf?

Yield versus ownership

At its core, the decision comes down to two factors: ownership and yield.

Buying ETH directly through an exchange such as Coinbase or Robinhood means owning the underlying asset. Returns are driven by price movements, while the exchange acts as custodian. Investors who choose to stake their ETH through Coinbase can earn rewards—typically in the 3% to 5% annual range—after the platform deducts a commission. While Coinbase manages the technical aspects of staking, investors remain within the crypto ecosystem and retain the ability to unstake, transfer, or deploy their ETH elsewhere.

Ether ETFs take a different approach. Investors buy shares through a brokerage account, and the fund purchases and holds ETH on their behalf. If the ETF includes staking, the fund stakes the ETH and distributes rewards to shareholders, without requiring them to interact with wallets, validators, or exchanges.

Fees are a major differentiator.

Grayscale’s Ethereum Trust (ETHE), for example, charges a 2.5% annual management fee regardless of market performance. If staking is involved, an additional portion of rewards typically goes to the fund’s staking provider before distributions reach investors.

Coinbase, by contrast, does not charge a management fee for holding ETH, but it takes a cut of staking rewards—up to 35%, according to its disclosures. Fees may be lower for users enrolled in Coinbase’s paid subscription plans.

“There is no fee to stake your assets,” Coinbase states on its website. “Coinbase takes a commission based on the rewards you receive from the network. Our standard commission is 35% for ADA, ATOM, AVAX, DOT, ETH, MATIC, SOL, and XTZ.”

Even so, effective staking yields are often higher through exchanges than through ETFs, though ETFs may appeal to investors prioritizing simplicity and access through traditional brokerage accounts.

For those investors, staking ETFs offer ETH price exposure and income generation without ever opening a crypto wallet. The experience resembles owning a dividend-paying fund—except the yield comes from blockchain activity rather than corporate profits.

Risks and trade-offs

That simplicity comes with caveats. Income from staking is not guaranteed.

Like dividend-focused equity ETFs, staking funds face variable payouts. Ethereum staking rewards fluctuate based on network conditions and the total amount of ETH staked. Current annual yields hover around 2.8%, according to CoinDesk data, but they can rise or fall over time.

Operational risks also matter. If a validator underperforms or is penalized, a fund could lose a portion of its staked ETH. Similar risks exist when staking through Coinbase, though direct holders retain greater flexibility to unstake or move their assets.

Control is another key distinction. Investors holding ETH directly—even on centralized platforms—can typically transfer it to a wallet or use it in decentralized finance applications. ETF investors cannot. Their exposure is limited to buying and selling shares during market hours, with no ability to move, stake independently, or deploy ETH on-chain.

In short, staking ETFs offer convenience and familiarity, while direct ETH ownership provides greater control and potentially higher effective yields. Which option makes sense ultimately depends on whether an investor values simplicity—or sovereignty—more.

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