Summary Grayscale Ethereum Trust ETF remains a total avoid due to its persistently high 2.5% expense ratio, despite now staking most of the assets under management. Grayscale Ethereum Mini Trust ETF offers a vastly superior net yield at 0.15% fees and a competitive staking ratio, making it the preferred long-term exposure. ETHE's high fees fully offset staking rewards, resulting in a negative net yield even before factoring in Ethereum's inflation rate. ETH's lower fees and efficient staking deliver a positive real yield, while ETHE's structure erodes returns for investors seeking Ethereum exposure. In the 8 months since I last covered the Grayscale Ethereum Trust ETF ( ETHE ) for Seeking Alpha, the fund has had a major development that I think warrants revisiting the ticker. This is a fund that I have some familiarity with, as I've covered it for SA nearly a dozen times since 2022. Through closed-end fund arbitrage opportunities during 'crypto winter' and the eventual conversion to a spot ETF in summer 2024, the one thing that has remained constant regarding ETHE is Grayscale's 2.5% fee. However, despite what I have long felt is an astronomically high expense ratio for a passively managed fund, ETHE is now staking the overwhelming majority of the fund's assets. In this update, we'll look at Ethereum staking data, whether or not in-fund staking moves the needle for me on ETHE, as well as how ETHE's staking compares with its sister fund, the Grayscale Ethereum Mini Trust ETF ( ETH ). Ethereum Staking Unlike Bitcoin (BTC-USD), which is a proof-of-work network, Ethereum is a proof-of-stake network. This means holders of Ethereum can stake coins in the same way T-bill buyers can lend dollars to the government. In return for pledging that ETH collateral to the network, stakers are paid interest (or a staking yield). Generally speaking, the more ETH that comes into stake, the lower the staking yield will be over time. The chart below shows the 1-year trend in Ethereum's staking yield: Ethereum Staking Yield, 1 yr trend (StakingRewards) While there have been small moments of spikes in staking yield, the long-term trend is generally sideways to down, with a 365-day average in-kind return of 3.06%. Again, a large part of the staking reward declining is the fact that staked ETH supply typically goes up over time: ETH Staked by Category (Dune Analytics/Hildobby) That said, with 34.8 million ETH currently staked, we have seen about 3 million ETH come out of stake over the last 2 months. While staking services offered by pools and centralized exchanges have all seen ETH come out of stake going back to October, the 'unidentified' category has been leading the way lower in ETH coming out of stake. Which indicates it likely isn't any one protocol or application that is responsible for the 3 million decline. It should be noted that staked ETH typically generates yield from a combination of network transaction fees, burned ETH, and new token emissions. The latter of which has risen from 0.2% a year ago to 0.8% currently. This is important to consider when calculating real returns from staking, which we'll walk through in a moment. ETHE 'Fee Flight' Continues, But Slowed At the height of ETHE's domination in the spot ETF market, the fund held roughly 2.5 million ETH in the trust. There are now less than 1 million ETH in the fund. This is partly due to Grayscale's mini ETH fund absorbing over 717k coins since its inception. But it's mainly due to Grayscale simply losing those assets to competitors. The chart below shows just how drastically ETHE's coin supply market share has collapsed over the last 16 months: On-Chain ETH Share (TheBlock) When the spot ETH funds launched in July 2024, ETHE came out of the gates with a 90% share of spot ETF assets. It currently claims just 19% share of spot ETF Ether. However, the overwhelming majority of ETHE outflows happened in the first two quarters following spot conversion. Q3 and Q4 of 2024 saw a combined outflow of $3.6 billion in assets. With just a few weeks remaining in 2025, outflow from the fund over the last 4 quarters has totaled a little over $1.3 billion. But to be clear, 2025 has been a tremendously positive year for Ethereum capital flows, with over $10 billion of total net flows into the spot ETH ETFs through December 8th. ETHE is the outlier. ETHE vs. ETH From an assets under management standpoint, ETHE remains the bigger fund at $2.9 billion, though ETH has gained considerable ground in spite of its relative newness. The biggest difference between the two funds is fees: Grayscale Funds ETHE ETH AUM $2,920,630,819 $2,237,355,892 Expense Ratio/Sponsor Fee 2.50% 0.15% % Staked 74.58% 65.50% Share Price $25.76 $29.59 Source: Grayscale as of 12/8/25 At 2.5%, ETHE is still a very expensive fund compared with just about every single other product in the market. For instance, the iShares Ethereum Trust ETF ( ETHA ) charges just 25 basis points and is the clear winner in the market with just under half of all ETH held through US-listed spot ETF products. On fees, ETH is actually even more competitive than both ETHA and ETHE at just 15 basis points. And while the 65% staking ratio for ETH may look less enticing on the surface, when we factor in the fees, the expected total return for ETH will actually be vastly superior to that of ETHE. Grayscale Funds ETHE ETH Share Price* $25.76 $29.59 365d Staking ROI** 3.06% 3.06% Staked per Share $19.21 $19.38 1-year Yield Per Share $0.588 $0.593 1-year Fees Per Share $0.64 $0.04 Net Yield -$0.06 $0.55 Source: **StakingRewards, *Grayscale as of 12/8/25, Author's calculations The table above assumes the price of Ether remains flat for a 12-month holding period. It also assumes the staking reward for the next 12 months remains consistent with the last 12 months - which is certainly no guarantee. But given those assumptions, ETH has a net yield to the shareholder of 55 cents per share after fees. Because of the 2.5% expense ratio, ETHE actually has a slightly negative expected 1-year net yield. And this doesn't take Ethereum's inflation into consideration either. At present, Ethereum has an inflation rate of about 0.8% annually. Which means that as of article submission, Ethereum's real yield from staking is closer to 2% than 3%. If we add the inflation rate to the equation, the true 'net yield' for ETH is closer to 35 cents per share, whereas ETHE is negative by 26 cents. Investor Takeaways For me, ETHE remains a total avoid in spite of the fund enabling staking. Grayscale's mini ETH ETF is a superior product, in my opinion. It's already the long-term (after waivers) lowest-fee fund in the spot ETH market at just 15 basis points. And despite the fact that it has a smaller staking ratio than its Grayscale counterpart, the net yield from that staked Ether is vastly superior for ETH than for ETHE due to high fees from the latter. For long-term investment exposure to Ethereum, I think ETH is the better pick of the Grayscale funds at this point in time.
