How US spot crypto ETFs work
A spot crypto ETF holds actual Bitcoin or Ether in a regulated custodian wallet — typically Coinbase Custody, BitGo, Anchorage Digital, or Gemini Custody. Authorized participants (APs), usually large broker-dealers, create and redeem shares directly with the issuer in 25,000-share blocks, exchanging cash or — under the SEC's evolving guidance — the underlying digital asset.
The arbitrage between the ETF's market price and its NAV keeps the two aligned. Persistent premiums or discounts to NAV signal AP friction, custody concerns, or sharp directional demand that creation pressure can't immediately absorb.
Why AUM matters
Assets under management is the most reliable institutional-flow signal in crypto. ETF AUM growth reflects allocated capital from RIAs, family offices, pensions, and qualified retail brokerage accounts — the audience that historically couldn't or wouldn't touch direct-custody crypto.
Custody concentration
As of launch, Coinbase Custody held the underlying assets for 8 of 11 spot Bitcoin ETFs — a concentration risk worth tracking. The Ether ETF cohort is more distributed across BitGo, Anchorage, and Coinbase Custody.
Tax treatment
Spot crypto ETFs are taxed as ordinary securities under IRS Section 1234 — long-term capital gains apply after a 12-month hold. This differs from direct crypto holdings, where Form 8949 reporting and FIFO/HIFO cost-basis tracking apply. Always consult a US tax advisor for your specific situation.