Ethereum ETF Could Reach CME Threshold with $362 Million

A proposed 3x Ethereum ETF, ETHK, could reach CME's futures threshold with just $362.1 million in assets. At the current futures valuation, this amount would target around $1.09 billion in exposure, equivalent to 8,000 CME Ether futures contracts. CME's accountability level for Ethereum futures stands at 8,000 contracts, a threshold that ETHK could hit if fully invested in standard CME Ether futures.

The SEC approved a rule change for ETHK on October 2, though its first trading date remains pending. Volatility Shares' existing ETHU fund held 19,204 October CME Ether futures contracts worth $2.61 billion as of October 6, significantly above the 8,000-contract threshold. The notional value per contract was $135,800, meaning a 3x ETF would need about one-third of that in assets to meet the threshold.

CME's accountability level is a regulatory threshold, but participants can hold positions above it. CME can request information about large positions or order reductions to maintain market order. If ETHK's assets grow, its contract equivalent could exceed 8,000, potentially requiring the use of later-dated futures, Ethereum-linked ETPs, or options. The combined position of ETHU and ETHK, if aggregated by CME, could reach up to 41,300 contracts at $1 billion in assets.

For comparison, a 3x Bitcoin ETF would reach CME's 5,000-contract threshold at about $718 million in assets, nearly double ETHK's threshold. The actual impact of ETHK's position will depend on market liquidity and the fund's ability to track its benchmark effectively.