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Fidelity Invests $5M in Ethereum Index Fund

Fidelity reveals that it has invested $5 million in a new Ethereum index fund, through registration documents filed to the US Securities and Exchange Commission earlier today.

The investment solutions and financial services provider, with $4.5 trillion assets under management, had registered its Fidelity Ethereum Index Fund on Tuesday. 

However, in the registration documents filed to the US Securities and Exchange Commission (SEC), Fidelity indicates that its first sale took place on September 26.

Fidelity’s new Ethereum Index Fund is one of the latest competitors to join the race in an increasingly saturated market with other well-regarded Ethereum funds.

Bitwise, a San Francisco-based crypto asset manager with $1 billion in management, stated in an SEC filing that its Ethereum Fund has $25 million worth of assets under management. Bitwise’s index fund was launched in 2018.

Index funds and exchange-traded funds

Rather than setting up an exchange-traded fund, or ETFs, Fidelity had decided to set up an index fund as its latest crypto-based offering. 

Index funds can only be purchased once trading hours have closed, and have already set rates. On the other hand, ETFs are bought and sold throughout trading hours of any trading day – similar to stocks. Both index funds and ETFs also require a minimum investment in order to participate.

Index funds typically have higher minimums – but Fidelity’s new $50,000 minimum on Ethereum index fund and Grayscale’s $25,000 minimum on its Ethereum Trust (ETHE) ETF make these funds largely inaccessible to retail investors. These Ethereum funds are also limited to accredited investors, which is a far cry from democratising the crypto sphere.  

Fidelity’s involvement in crypto

In 2018, Fidelity launched a new subsidiary, Fidelity Digital Asset Services, with the intention of “[making] digitally-native assets, such as bitcoin, more accessible to investors,” according to chief executive Abigail P. Johnson. “We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.“

This September, the leading asset manager was rumoured to consider Bitcoin trading options to its customers – a market consisting of more than 34 million retail customers. 

The news came from Galaxy Digital CEO Mike Novogratz at New York’s SALT forum, a conference focused on alternative forms of investment, bitcoin, fintech, healthcare, infrastructure, and sustainability. 

“A bird told me, a little bird in my ear, told me Fidelity is going to shift its retail customers into crypto soon enough,” he said at the event. “I hope that bird is right.”

Meanwhile, Fidelity has been working on its own crypto exchange, EDX Markets. Partnering with Charles Schwab, Citadel Securities, and other institutional backers to form a consortium to, according to a Fidelity spokesperson, “facilitate a more efficient, secure and cost-effective process for trading digital assets.”

Earlier this year, Fidelity launched two new exchange-traded funds (ETFs) that allows their clients to gain exposure to companies within the crypto sector. 

Fidelity global macro director Jurrien Timmer, in a statement last year, said that bitcoin had a unique advantage over gold. “Bitcoin is gaining credibility, and as a digital analog of gold but with greater convexity, my guess is that bitcoin will, over time, take more market share from gold,” said Timmer.

While Fidelity is America’s largest provider of 401(k) savings accounts, the US Department of Labour expressed concerns in Fidelity’s 401(k) offerings, while senators came forth with questions about risks in investing savings in crypto assets.

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