10-Q: Fidelity Ethereum Fund Q1 2026 Performance Update

Fidelity Ethereum Fund reports a significant decrease in net assets and NAV per share in Q1 2026, driven by a decline in ether prices and net redemptions.

Summary

• The Fidelity Ethereum Fund experienced a substantial decrease in net assets, falling from approximately $2.2 billion to $1.2 billion during the first quarter of 2026.
• This decline was primarily attributed to a 29.27% drop in the price of ether, from $2,971.55 on December 31, 2025, to $2,101.84 on March 31, 2026.
• Net Asset Value (NAV) per share also decreased by 29.31%, from $29.64 to $20.95 over the same period.
• The fund saw net redemptions of Shares, with 45,700,000 Shares redeemed compared to 29,000,000 Shares created.
• Consequently, the quantity of ether held by the fund decreased from 743,795 to 576,821.
• The net decrease in net assets from operations for the quarter was approximately $0.7 billion, largely due to unrealized depreciation on ether holdings and realized losses from share redemptions.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the substantial decrease in net assets, NAV per share, and the significant decline in ether's price, coupled with net redemptions.

Negatives

• Net assets decreased by approximately $1 billion, from $2.2 billion to $1.2 billion, in the first quarter of 2026.
• The Net Asset Value (NAV) per share dropped by 29.31% from $29.64 to $20.95.
• The price of ether decreased by 29.27% during the quarter.
• There were net redemptions of Shares, indicating outflows from the fund.
• The fund experienced a net realized loss of $0.3 billion from the sale of ether for redemptions.
• Unrealized depreciation on ether holdings amounted to approximately $0.4 billion.

Risks

• The Trust's investment strategy is concentrated in a single asset (ether) within a single asset class, maximizing exposure to market risks associated with ether and digital assets.
• Any losses resulting from a decrease in the value of ether will directly reduce the value of an interest in the Trust and will not be offset by gains from diversified assets.
• The price of ether is volatile and market movements are difficult to predict.
• Potential risks include government regulation, security breaches experienced by service providers, and global economic and political uncertainties.

Future Outlook

The filing does not contain specific forward-looking statements or guidance regarding future performance, but it does outline the fund's objective to track the performance of ether and its passive management strategy.

Management Comments

• The Sponsor believes that the Shares are designed to provide investors with a cost-effective and convenient way to invest in ether without purchasing, holding and trading ether directly.
• The Sponsor has established a Valuation and Liquidity Committee to carry out the day-to-day fair valuation responsibilities and has adopted policies and procedures to govern the fair valuation process.
• If the Valuation and Liquidity Committee determines in good faith that the Index does not reflect an accurate ether price, then the Valuation and Liquidity Committee instructs the Administrator to employ an alternative method to determine the fair value of the Trusts assets.

Industry Context

StockSavvy.ai notes that this filing reflects the ongoing volatility and performance challenges faced by cryptocurrency-linked investment products, particularly those directly holding digital assets like ether, during the first quarter of 2026. The significant decline in ether's price and subsequent net redemptions highlight the sensitivity of such funds to underlying asset price movements.

Comparison to Industry Standards

• The filing does not provide direct comparisons to specific industry benchmarks or competitor funds beyond referencing the Fidelity Ethereum Reference Rate (the Index) for tracking ether's performance.
• The performance of the Fidelity Ethereum Fund, with a total return of -29.31% at Net Asset Value for the quarter, reflects the broader market downturn experienced by ether during the period, which impacted other ether-focused investment vehicles.
• While specific comparable companies are not named, the fund's strategy of direct ether holding is common among spot ether ETFs and similar products globally.

Legal Proceedings

• None.

Related Party Transactions

• Fidelity Service Company, Inc. (affiliate of Sponsor) serves as Administrator.
• Fidelity Digital Assets, N.A. (affiliate of Sponsor) serves as Custodian.
• Fidelity Distributors Company LLC (affiliate of Sponsor) serves as Distributor.
• Fidelity Product Services LLC (affiliate of Sponsor) serves as Index Provider.
• All fees and expenses related to services performed by these affiliates are borne by the Sponsor.

Stakeholder Impact

• Shareholders have experienced a significant decrease in the value of their investment due to the decline in ether prices and fund performance.
• The fund's concentration in ether exposes shareholders to the volatility of this single digital asset.
• The net redemptions suggest some shareholders are exiting their positions, potentially impacting liquidity for remaining shareholders.

Next Steps

• The Trust will continue to operate under its Trust Agreement.
• The Sponsor will continue to manage the Trust's operations and expenses.
• The Administrator will continue to calculate the Trust's NAV daily.
• The Trust will continue to seek to track the performance of ether.

Key Dates

Recommendation

The fund's performance is directly tied to the volatile price of ether. While the recent quarter showed significant declines, the fund's objective is to track ether's performance. Investors who are bullish on ether may see this as a buying opportunity, while those concerned about volatility might consider reducing exposure. Given the direct correlation to ether, a 'hold' recommendation is appropriate for existing investors who understand the risks, pending a clearer market direction for ether.

Keywords

Fidelity Ethereum Fund, Ethereum, Ether, Digital Assets, Cryptocurrency, ETF, SEC Filing, 10-Q, NAV, Market Risk, Investment Fund