Investors can now choose between owning ether directly or buying shares in a staking ETF that earns rewards on their behalf. While staking ETFs offer yield, they come with risks and less control than holding ETH in an exchange or wallet. Grayscale’s Ethereum staking ETF recently paid $0.083178 per share, yielding $3.16 in rewards on a $1,000 investment. Investing in crypto assets like ether, the native token of the Ethereum network, once followed a simple path: traders bought coins on platforms like Coinbase or Robinhood, or stored them in self-custody wallets such as MetaMask, and held them directly.
Staking, or pledging a certain amount of cryptocurrencies to a network to validate transactions and earn rewards, was seen as a way for investors to generate passive income while holding the tokens through crypto exchanges in anticipation of price appreciation. At its core, the decision comes down to two factors: ownership and yield. When an investor buys ETH directly through an exchange like Coinbase or Robinhood, they’re buying the actual crypto asset. Investors gain or lose money depending on whether the price increases or decreases, while the exchange holds the asset on their behalf.
If they choose to stake that ETH through Coinbase, the platform handles the staking process, and the investor earns rewards — typically around 3% to 5% annually — minus a commission that the exchange collects on those rewards. While this approach doesn’t require managing validators or running software, it still keeps the investor within the crypto ecosystem, allowing them to transfer, unstake, or use their ETH elsewhere. On the other hand, if an investor chooses to buy shares of an ether ETF, that fund would purchase ETH on their behalf, without the investor ever having to log in or create a crypto wallet. And if that ETF has a staking component, the fund that buys ETH will stake it and earn rewards on behalf of the investors.
Fees are another major difference. Grayscale’s Ethereum Trust (ETHE), for instance, charges a 2.5% annual management fee, which applies regardless of market conditions. If the fund also stakes ETH, a separate cut goes to the fund’s staking provider before any earnings are passed on to shareholders. Coinbase, by contrast, doesn’t charge an annual management fee to hold ETH, but it does take up to 35% of any staking rewards, which is a standard practice for any platform offering yield on staking, although the fees can vary. There is no fee to stake your assets.
There is no fee to stake your assets. Coinbase takes a commission based on the rewards you receive from the network. The fees are lower for someone who is part of Coinbase’s paid premium membership. That makes the effective yield from staking typically higher on Coinbase than through a staking ETF, though the ETF structure may appeal more to investors who want simplicity and access through a traditional brokerage account.
However, there are some caveats. Just like traditional stock-related ETFs, these staking funds are subject to risks, such as fluctuating yields. Rewards fluctuate. And if something goes wrong with the staking operation — say the validator fails or gets penalized — the fund could lose part of its ETH.
The same is true when staking through Coinbase: while the platform handles technical details, rewards still fluctuate, and poor validator performance could reduce returns. There’s also the matter of access and control. Even when an investor holds ETH on an exchange like Coinbase or Robinhood, they are still part of the crypto ecosystem. If someone ever wants to transfer their ETH to a wallet or use it in DeFi apps, they can (though Robinhood’s withdrawal process adds complexity).
With an Ethereum ETF, that flexibility disappears. Investors don’t hold ETH directly and can’t transfer it to a wallet, stake it independently, or use it in DeFi protocols. Their exposure is limited to buying or selling ETF shares through a brokerage account, meaning access to the asset is entirely mediated by the fund structure and traditional market hours rather than the blockchain itself. Sounds fairly easy, which is one of the reasons these ETF products became so popular in the first place.
However, there are some caveats. So, which one is better? The answer lies in what investors are looking for from these products. If they are looking for yield without managing keys or validators, a staking fund might be a good option. Even if the fees are eating into the total returns. However, if an investor values direct ownership, long-term flexibility, or is willing to stake ETH themselves, holding crypto on a wallet or an exchange may be the better option.
Plus, they can avoid the fund management fees (although they will still need to pay various transaction fees). Investors today can choose between owning ETH directly or buying shares in a staking ETF that earns rewards on their behalf. Direct ETH ownership exposes investors to price moves; staking ETFs offer yield but add fund-level risk and reduce control compared with self-custody or direct exchange holdings. Coinbase’s Ethereum Trust (ETHE) charges a 2.5% annual management fee, and if the fund also stakes ETH, rewards are shared with the fund’s staking provider before shareholders. For example, Grayscale’s staking ETF recently paid $0.083178 per share, yielding about $3.16 in rewards on a $1,000 investment.
With direct staking through platforms like Coinbase, investors typically see around 3% to 5% annual rewards, minus a commission on those rewards. Coinbase does not charge an annual management fee to hold ETH, but staking rewards can be reduced by up to 35% depending on plan, and premium memberships can lower this effectively. There is no separate staking fee to participate; Coinbase takes a commission based on the rewards you receive, and premium membership lowers this rate for eligible users. This means the yield from staking via Coinbase is often higher than through a staking ETF for those seeking direct exposure, though the ETF route appeals to those who want simplicity and traditional brokerage access.
Compared with an ether ETF, staking funds offer simplicity and brokerage access, but investors won’t hold ETH directly and cannot transfer to a wallet or participate in DeFi unless they exit the fund. An ETF that stakes ETH hands rewards to investors via the fund, but access is mediated by market hours and the fund’s structure. Risks include fluctuating yields and the possibility of validator issues or penalties that could reduce returns. In addition, ETF exposures limit control over custody and use of ETH in DeFi, unlike direct ownership or self-custody. The decision ultimately hinges on whether an investor prioritizes yield with minimal management or direct ownership and long‑term flexibility.
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