Grayscale Debuts Income-Driven Ethereum ETF: New Opportunity for Crypto Investors

Grayscale has launched the Grayscale Ethereum Covered Call ETF (ETCO), offering investors a unique chance to earn regular income from their Ethereum exposure. The new ETF utilizes a covered call strategy on Ethereum-related ETPs, targeting bi-weekly distributions that could reshape how crypto holders think about yield and risk management.

Key Takeaways

• Grayscale launches ETCO, an actively managed Ethereum covered call ETF.

• The ETF aims for bi-weekly income by writing call options on Ethereum ETPs.

• Investors enjoy steady cash flow, but upside potential can be limited in strong markets.

• ETCO does not hold Ether directly, focusing on derivatives tied to Ethereum ETPs.

• Positioned alongside Grayscale's Bitcoin Covered Call ETF (BTCC) and Premium Income ETF (BPI).

How the Ethereum Covered Call ETF Works

ETCO is designed to capture yield from Ethereum’s volatility by systematically selling call options on ETPs tracking Ethereum, such as the Grayscale Ethereum Trust ETF (ETHE) and Grayscale Ethereum Mini Trust ETF (ETH). By doing this near the current market price, the fund collects premiums, which are then distributed to investors every two weeks.

This strategy allows investors seeking income to benefit from Ether’s price swings while mitigating some downside risk. However, the tradeoff is capped gains during periods of sharp Ethereum price increases. The ETF does not directly hold Ethereum tokens, but rather focuses its exposure through derivatives, improving compliance and reducing custody costs.

Income-First Strategy in a Volatile Market

Historically, the covered call approach has been popular in traditional equity markets, enabling investors to monetize volatility and manage risk. Grayscale adapts this model for digital assets, blending established techniques with the unique dynamics of cryptocurrencies.

With Ether up 34% in 2025—outpacing Bitcoin’s 20% for the same period—the launch is timely, appealing to investors looking for alternative ways to profit from increased cryptocurrency market volatility. The ETF’s management fee is competitive, with a total expense ratio of approximately 0.66%.

The Growing Suite of Crypto Income Products

ETCO joins Grayscale’s expanding array of outcome-oriented offerings, including the Bitcoin Covered Call ETF (BTCC) and Premium Income ETF (BPI). These products reflect a shift in the market toward structured income strategies, as investors seek not only price appreciation but also regular returns from their digital assets.

Grayscale, a long-standing player in the crypto market, aims to provide tools suited to different investor profiles—from growth-oriented to yield-seeking. All these ETFs are accessible through regular brokerage accounts and trade on NYSE Arca under familiar tickers.

What Investors Should Consider

While ETCO presents a compelling avenue for yield, investors need to be aware that covered call strategies inherently limit maximum profits if Ether unexpectedly rallies. The fund’s focus on distributing current income also means performance may fluctuate based on options pricing and market volatility.

Investors are encouraged to review the ETF’s prospectus carefully to understand the mechanics, risks, and costs involved. The ETF may be best suited to those already holding Ethereum who wish to overlay an income strategy or those looking to diversify their approach to the crypto market without managing options trades themselves.

Looking Ahead

As digital assets mature, approaches like ETCO’s bi-weekly paying covered call strategy signal a maturing market—one where investors can access both growth and income streams. Grayscale’s new offering stands as another step toward mainstreaming sophisticated, outcome-driven crypto investment tools.

Further Reading

• Grayscale Rolls Out Ethereum Covered-Call Fund, Joins BTC Covered-Call Suite, BlockchainReporter.

• Grayscale Unlocks Ethereum Volatility for Investor Income, AInvest.

• Grayscale Introduces ETCO to Add Income to Ethereum Exposure, CoinCentral.

• Ethereum Covered Call ETF Targets Biweekly Payouts – With a Tradeoff — TradingViewNews, TradingView.