Ethereum News Today: Ethereum Gets Income Layer as Grayscale Unveils Covered Call ETF Strategy

Grayscale Investments has launched the Grayscale Ethereum Covered Call ETF (ETCO), an actively managed fund designed to generate current income while maintaining exposure to Ethereum (ETH). As the second-largest cryptocurrency by market capitalization, Ethereum has increasingly attracted institutional and retail investors, particularly after the debut of spot Ethereum ETFs in the U.S. in 2024. ETCO expands Grayscale’s suite of income-oriented strategies, which already includes the Bitcoin Covered Call ETF (BTCC) and Grayscale Premium Income ETF (BPI). The new ETF targets investors seeking a systematic cash-flow stream derived from option premiums while still retaining exposure to ETH’s price movements.

ETCO operates by writing call options on Ethereum ETPs—such as Grayscale Ethereum Trust ETF (ETHE) and Grayscale Ethereum Mini Trust ETF (ETH)—that are designed to track the price of Ether. The fund collects premiums from these options and distributes them to shareholders on a biweekly basis, a structure that mirrors Grayscale’s existing Bitcoin covered-call product. Krista Lynch, Senior Vice President of ETF Capital Markets at Grayscale, emphasized that ETCO complements existing Ethereum exposure by introducing an income component, making it a differentiated offering in the crypto asset space. As with other covered-call strategies, ETCO limits upside potential during sharp price rallies in exchange for generating regular income and potentially reducing volatility during drawdowns.

The fund, which began trading on the NYSE Arca on September 4, 2025, carries a total expense ratio of 0.66%, a competitive fee structure for an actively managed product. According to its fund details, ETCO’s assets under management stood at $1.4 million as of September 3, 2025, with a net asset value (NAV) per share of $35.01. The holdings are currently weighted heavily toward U.S. Treasury bills, Ethereum derivatives, and cash equivalents, with Ethereum ETPs making up a significant portion of the portfolio. The fund’s biweekly distribution model is intended to provide investors with a predictable income stream, a feature that aligns with the growing interest in structured, outcome-oriented crypto strategies.

The launch of ETCO coincides with broader shifts in Ethereum market dynamics. As of early 2025, institutional adoption of Ethereum has accelerated, driven by its use in blockchain infrastructure and financial services. Major Wall Street firms are integrating Ethereum into trading and settlement systems, increasing demand across both spot and derivative markets. At the same time, Ethereum’s price has outperformed Bitcoin in 2025, rising 34% year-to-date compared to Bitcoin’s 20% gain. The ETF’s timing reflects a strategic move to capture this momentum while offering a more stable and income-focused alternative for investors wary of Ethereum’s volatility.

Key factors influencing ETCO’s performance include option pricing, realized volatility in Ethereum markets, and the behavior of its distributions across varying market conditions. Investors are advised to note that, like all covered-call strategies, ETCO caps potential upside during periods of sharp ETH price surges. The fund’s success will depend on the efficiency of its options-writing strategy and its ability to maintain a consistent distribution schedule. Analysts suggest that ETCO could appeal to a wide range of investors, including those seeking to diversify their crypto exposure or those interested in generating regular income without fully committing to ETH’s speculative price swings.

The Ethereum market has also seen increased institutional ownership, with major funds and public companies treating ETH as a treasury asset. For example, BlackRock’s iShares Ethereum Trust (ETHA) has accumulated over 3 million ETH, representing a significant portion of the circulating supply. Grayscale’s ETHE remains a major player as well, with 1.13 million ETH under management. These developments highlight the growing legitimacy of Ethereum as an institutional asset class, further reinforcing the relevance of products like ETCO in the evolving crypto investment landscape.

Source:

[1] Grayscale Ethereum Covered Call ETF (ETCO) (https://etfs.grayscale.com/etco)

[2] Grayscale Investments Launches Ethereum Covered Call ETF (https://finance.yahoo.com/news/grayscale-investments-launches-ethereum-covered-154057923.html)

[3] Grayscale Unleashes ETCO: Ethereum Covered Call ETF Targets Biweekly Payouts – With a Tradeoff (https://www.coindesk.com/markets/2025/09/03/grayscale-launches-ethereum-covered-call-etf-as-ether-outpaces-bitcoin-with-34-gains)