Grayscale has launched the Ethereum Covered Call ETF (ETCO) to generate income through options strategies, capitalizing on growing institutional interest in Ethereum.

Grayscale Launches Ethereum Covered Call ETF Amid ETH Fund Inflows

Grayscale launched the Ethereum Covered Call ETF (ETCO) on June 4, 2025, aiming to generate income through options strategies. The ETF's launch occurs amid significant inflows into ETH funds, contrasting with Bitcoin ETF outflows.

ETF Structure and Investment Strategy

The fund will invest at least 80% of its net assets in options contracts that utilize an Ethereum ETP as the reference asset. The ETCO is non-diversified and seeks to provide current income and exposure to Ether through exchange-traded products like the Grayscale Ethereum Trust ETF (ETHE) and Grayscale Ethereum Mini Trust ETF (ETH).

Market Context and Ethereum's Performance

Ethereum ETFs saw $1.87 billion in net inflows in July 2025, followed by $3.95 billion in August, while Bitcoin ETFs faced net outflows. This trend reflects increasing institutional interest in Ethereum's DeFi and staking utility. One analyst noted that ETH is a tech play on the growth of Web3, a 'call option' or 'high-growth index for Web3 adoption,' whereas Bitcoin is 'digital gold'.

Grayscale's Broader ETF Strategy

Grayscale is expanding its crypto ETF offerings beyond Bitcoin and Ethereum, with filings for single-asset ETFs for Polkadot (DOT) and Cardano (ADA). The firm has also filed to convert its Avalanche Trust into a spot AVAX ETF and a Dogecoin Trust into a DOGE ETF, indicating a broader strategy to capture different segments of the crypto market.

Income-Generating Crypto Products

Grayscale's new ETF addresses the demand for products that can provide stable income streams while managing the risks associated with cryptocurrency volatility. Other income-generating crypto products include the ProShares Bitcoin ETF (BITO), which currently has a 55.15% yield, and YBTC, which offers a 3.97% distribution yield. These yields fluctuate based on Bitcoin's performance and volatility.

Grayscale’s new ETFs address the demand for products that can provide stable income streams while managing the risks associated with the cryptocurrency’s volatility by offering innovative investment strategies that leverage Bitcoin’s price movements to generate regular income for investors.

Potential Market Impact

The ETCO could attract traditional investors seeking income-generating crypto products, potentially increasing demand for ETH and related ETFs. The covered call strategy may also reduce volatility, offering a more stable investment option. With the launch of spot Ether ETFs potentially increasing demand pressure, as seen with Bitcoin, Ether could break its November 2021 all-time high of $4,870.