For Canadian investors looking to gain exposure to Ethereum through a regulated and convenient vehicle, the Purpose Ether ETF (ETHH.TO) and the Purpose Ether Yield ETF (ETHY.TO) are two common choices. While both provide access to the second-largest cryptocurrency, their underlying investment strategies and objectives are fundamentally different. Navigating these distinctions is key to selecting the right fund for your portfolio.
ETHH.TO: The Passive Approach to Ethereum
The Purpose Ether ETF (ETHH.TO) is a passive, “physically settled” ETF. This means the fund directly holds Ether, the native cryptocurrency of the Ethereum blockchain. Its investment objective is straightforward: to provide investors with long-term capital appreciation by mirroring the performance of Ether’s price. It is designed for investors who want a direct, simple, and secure way to gain exposure to the price movements of Ether without the complexities of self-custody or managing a digital wallet. The fund does not generate income and is suited for a buy-and-hold strategy focused on a potential rise in Ether’s value. “
ETHY.TO: The Actively Managed, Income-Generating Strategy
In contrast, the Purpose Ether Yield ETF (ETHY.TO) is an actively managed fund with a dual objective: to provide both monthly distributions and long-term capital appreciation. To achieve this, ETHY invests primarily in the Purpose Ether ETF (ETHH.TO) and then employs a derivatives-based “covered call” option writing strategy.
This strategy involves selling call options on a portion of its holdings to generate a regular stream of income from the premiums. This income is then distributed to unitholders on a monthly basis. While this can provide a consistent cash flow, it also caps the fund’s potential capital appreciation if Ether’s price experiences a significant and rapid upward surge.
Key Differences at a Glance: ETHH.TO vs. ETHY.TO
To help clarify the distinction, here is a comparison table outlining the key differences between the two ETFs:
| Feature | ETHH.TO (Purpose Ether ETF) | ETHY.TO (Purpose Ether Yield ETF) |
| Primary Objective | Capital Appreciation | Monthly Income Distributions |
| Investment Strategy | Passive: Holds Ether directly | Active: Uses a covered call strategy on top of Ether holdings |
| Income Generation | No income distribution | Monthly distributions from option premiums |
| Upside Potential | Unlimited, tied directly to Ether’s price | Capped by the covered call strategy |
| Risk Profile | High volatility, tied to Ether’s price movements | High volatility, but with an income component. Potential for lower capital appreciation in a bull market. |
| Ideal for Investors Who… | Seek pure, long-term exposure to Ether’s price | Want to generate regular income from their Ether exposure |
Making Your Investment Decision
The choice between ETHH.TO and ETHY.TO depends on your specific financial goals. If your primary objective is to gain direct, passive exposure to Ethereum’s price and you are comfortable with the volatility in pursuit of long-term growth, ETHH.TO is the more direct investment.
If you are an investor who values regular income and is willing to trade some of the potential upside for consistent monthly cash flow, ETHY.TO is designed to meet that need. Both funds are listed on the TSX and offer a regulated entry point, but their distinct strategies serve different purposes within a portfolio. Always review the latest fund facts and consult a financial professional before making an investment decision. “
Q&A: Answering Common Investor Questions
Q: Are these ETFs suitable for all investors?
A: No. Due to the high volatility of the underlying asset (Ether), both ETHH.TO and ETHY.TO are considered high-risk investments. They are best suited for investors with a high-risk tolerance who can withstand the possibility of significant losses.
Q: Can I receive staking rewards through these ETFs?
A: No, these funds do not offer staking rewards. The income from ETHY.TO is generated through an options strategy, not from staking the underlying Ether. “
Q: Which ETF has a higher expense ratio?
A: The actively managed nature of ETHY.TO and its options strategy typically result in a higher management expense ratio than the passively managed ETHH.TO. Investors should check the most recent fund documents for precise fee details.