10-Q: 21Shares Core Ethereum ETF Reports Q3 2024 Results: ETF Navigates Initial Period Amidst Ethereum Price Volatility

21Shares Core Ethereum ETF (CETH) reports its financial results for the three months ended September 30, 2024, marking its first fiscal year of operations amidst fluctuations in the price of Ethereum.

Summary

• 21Shares Core Ethereum ETF (CETH) has released its financial statements for the period ended September 30, 2024.
• The Trust is a Delaware statutory trust formed on September 5, 2023, and listed on the Cboe BZX Exchange on July 23, 2024, under the ticker symbol CETH.
• The Trust's investment objective is to track the performance of ether, as measured by the CME CF Ether-Dollar Reference Rate New York Variant, adjusted for expenses.
• As of September 30, 2024, the Trust held 4,850 ether with a fair value of $12,582,986.
• The net asset value (NAV) per share was $12.97 based on 970,000 shares outstanding.
• For the three months ended September 30, 2024, the Trust reported a net investment loss of $0.
• The net realized and change in unrealized loss on investment in ether was $(3,223,608).
• The Sponsor, 21Shares US LLC, is waiving the entire Sponsor Fee for the first six months or until the Trust reaches $500 million in assets.
• The Trust is an emerging growth company and may elect to comply with reduced public company reporting requirements.
• The Trust creates and redeems shares only in Creation Units of 10,000 shares or multiples thereof, and only Authorized Participants can place orders.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the ETF experienced losses due to ether price depreciation, the Sponsor's fee waiver is a positive factor. The ETF is also new, so it's too early to make a definitive judgment.

Positives

• The Sponsor is waiving the entire Sponsor Fee of 0.21% for the first six months of operation or until the Trust reaches $500 million in assets, reducing expenses for investors.
• The ETF provides investors with exposure to ether through a regulated and transparent investment vehicle.
• The Trust has established custodial services agreements with multiple custodians, including Coinbase, BitGo, and Anchorage, to safeguard its ether holdings.
• The ETF is listed on a major exchange (Cboe BZX), providing liquidity for investors.

Negatives

• The ETF experienced a net realized and change in unrealized loss on investment in ether of $(3,223,608) for the three months ended September 30, 2024, due to a decline in ether prices.
• The ETF's value is directly tied to the price of ether, which is known for its volatility.
• The ETF is new, with limited operating history, making it difficult to assess its long-term performance.

Risks

• The value of the Shares is directly related to the value of ether, which is a volatile asset.
• The Trust is subject to risks associated with holding ether, including security risks, regulatory risks, and market risks.
• Shareholders have limited rights of legal recourse against the Trust, Trustee, Sponsor, Administrator, Prime Broker and Custodians.
• The Custodians have limited liability, impairing the ability of the Trust to recover losses relating to its ether and any recovery may be limited, even in the event of fraud.
• The Index Provider has limited liability relating to the use of the Index, impairing the ability of the Trust to recover losses relating to its use of the Index.
• The Trust is an emerging growth company and may elect to comply with reduced public company reporting requirements, which could reduce the amount of information available to investors.

Future Outlook

The report includes forward-looking statements regarding future events and the Trust's operations, which are subject to risks and uncertainties. The Sponsor does not intend to update these statements even if new information becomes available.

Industry Context

The launch of Ethereum ETFs represents a growing trend in the digital asset space, offering traditional investors exposure to cryptocurrencies through familiar investment vehicles. The performance of CETH will be closely watched as it competes with other similar ETFs and traditional investment options.

Comparison to Industry Standards

• It is difficult to compare the results of this ETF to industry standards as it is a new fund with a limited operating history.
• Comparable Ethereum ETFs include those offered by Grayscale, ProShares, and VanEck.
• The 0.21% sponsor fee, while currently waived, is competitive with other similar ETFs in the market.
• The ETF's performance will be judged against the performance of the CME CF Ether-Dollar Reference Rate New York Variant, which it seeks to track.

Legal Proceedings

• As of September 30, 2024, the Trust was not subject to any material legal proceedings, nor, to our knowledge, are any material legal proceeding threatened against the Trust.

Related Party Transactions

• The Sponsor, 21Shares US LLC, is a related party to the Trust.
• As of September 30, 2024, the Sponsor owned 20,000 Shares of the Trust.
• The Sponsor arranged for the creation of the Trust and is responsible for the ongoing registration of the Shares for their public offering in the United States and the listing of Shares on the Exchange.

Stakeholder Impact

• Shareholders are exposed to the price volatility of ether.
• Authorized Participants are involved in the creation and redemption of Shares.
• The Sponsor is responsible for managing the Trust and waiving the Sponsor Fee.
• The Custodians are responsible for safeguarding the Trust's ether holdings.

Next Steps

• The Trust will continue to operate and track the performance of ether as measured by the CME CF Ether-Dollar Reference Rate New York Variant.
• The Sponsor will continue to manage the Trust and waive the Sponsor Fee for the first six months or until the Trust reaches $500 million in assets.
• The Trust will continue to issue and redeem shares in Creation Units through Authorized Participants.

Key Dates

Keywords

Ethereum ETF, Ether, CETH, 21Shares, Cryptocurrency, ETF, Digital Assets, Blockchain