The New York Stock Exchange (NYSE) has submitted a proposal to the U.S. Securities and Exchange Commission (SEC), seeking approval for the Bitwise Ethereum ETF to participate in Ethereum staking. The goal is to offer investors additional yield while supporting the growth of the Ethereum ecosystem. Although the market sentiment toward Ethereum remains bearish, and capital continues to flow out, if approved, the proposal could bring about supply tightening, enhanced liquidity, and strengthened network security—potentially marking a significant step toward mainstream adoption.

In this era where crypto intertwines with traditional finance, market trends shift rapidly. Recently, the NYSE submitted a proposal to the SEC requesting permission for the Bitwise Ethereum ETF to engage in staking. This news has brought a breath of fresh air, opening a new income stream for investors and adding a glimmer of optimism to Ethereum’s future.

However, the current outlook for Ethereum in the crypto market is far from rosy. Spot Ethereum ETFs have seen net outflows for four consecutive weeks. In the first week of March 2025 alone, approximately $120 million exited the market, underscoring a clear lack of investor confidence.

At the same time, persistent concerns over high gas fees and intensifying competition from Layer 2 solutions have dimmed Ethereum’s luster. With challenges coming from all directions, can this new proposal offer a turning point?

The Beginning of a Proposal: The First Handshake Between Staking and ETFs

The Bitwise Ethereum ETF is an exchange-traded fund designed to give investors exposure to Ethereum via the traditional stock market. Meanwhile, staking has been a core component of Ethereum’s shift to a Proof-of-Stake (PoS) consensus mechanism since 2020. Holders lock up their ETH to help secure the network and, in return, earn an annual yield of around 4%–6%.

Now, the NYSE proposes merging the two: allowing ETF managers to stake ETH on behalf of investors. This would preserve the safety of a regulated fund structure while also enabling holders to enjoy the benefits of staking rewards.

According to a report by crypto.news, Bitwise plans to adopt a “point-and-click” staking method, simplifying the process of locking ETH while ensuring that all assets remain under the control of the fund. This design is clearly well thought out—it lowers the participation threshold and directly addresses regulators’ concerns about security and operational risk.

The market is watching with anticipation. Some predict that if the new SEC chair takes office smoothly and approves the proposal, this staking feature could be launched as early as April 2025. However, the approval process is far from guaranteed. The SEC has historically taken a cautious stance toward cryptocurrencies, particularly during Gary Gensler’s tenure. But as CoinDesk notes, with the U.S. government gradually becoming more crypto-friendly, the consensus in the industry is that approval of this proposal is a matter of when, not if.

Ethereum’s Potential Upside: A Multidimensional Benefit from Supply to Ecosystem

If the Bitwise Ethereum ETF is granted permission to stake, it would mark a major shift for Ethereum on multiple fronts. Let’s break down the potential benefits across several dimensions.

1. Subtle Push from Supply Tightening and Demand Growth

At its core, staking involves locking up ETH, which directly reduces circulating supply. Currently, more than 32 million ETH are staked on the Ethereum network, accounting for about 27% of the total supply. If ETFs join the staking pool, their managers would need to purchase and lock up even more ETH, further tightening supply. For example, if a $1 billion ETF allocates 50% of its holdings to staking, that would lock up around 250,000 ETH—about 0.2% of the current circulating supply. While seemingly small, this could trigger a chain reaction under bullish market sentiment. According to Coingape.com, when news of the proposal broke, ETH was hovering around $1,977, with traders speculating that reduced supply might push the price past $2,100. Back in 2020, when Ethereum 2.0 launched and staking surged, ETH jumped from $400 to $1,400—history may well repeat itself.

2. A Stream of Liquidity

ETFs serve as a bridge between crypto and traditional finance. By allowing staking, traditional investors can enjoy ETH staking rewards without setting up crypto wallets or learning blockchain intricacies—just through a brokerage account. This convenience could attract both institutions and retail investors. FXStreet reported that after Fidelity submitted a similar proposal, ETH rose 3% in a day, from $1,950 to $2,008—showing clear market enthusiasm. Over time, increased liquidity could not only stabilize ETH price volatility but also bring Ethereum into the boardrooms of Wall Street. In 2024, spot Ethereum ETFs had a cumulative trading volume exceeding $5 billion. With staking added, that number could soar to new heights.

3. A Win-Win for the Network and Investors

Staking impacts more than supply and demand—it also strengthens the Ethereum ecosystem and benefits investors. First, it enhances network security. The Ethereum Foundation has noted that every 10% increase in staked ETH improves the network’s resistance to attacks by an order of magnitude. ETF participation would push total staking even higher, contributing to decentralization and network resilience.

Second, investors stand to gain. Staking typically offers annual yields of 4%–6%. For instance, if the Bitwise ETF reaches $1 billion in size and offers a 5% return, that’s $50 million in annual passive income distributed to holders through ETF dividends—no technical involvement needed. Robert Mitchnick, Head of Digital Assets at BlackRock, told The Block, “If Ethereum ETFs can offer staking, it could unlock strong demand for ETH from traditional markets.” This mutual benefit—strengthening the network while rewarding investors—is the true appeal of blending staking with traditional finance.

4. A Regulatory Spring May Be Near

If the SEC approves this proposal, it would signal support for crypto innovation. Under former chair Gary Gensler, the agency was widely criticized for its strict approach, such as lawsuits against Coinbase and Binance in 2023. But the 2025 change in administration appears to be turning the tide.

Notably, a new SEC chair is expected to take office in April 2025. Their stance on crypto could determine the final outcome of this proposal. According to CoinDesk, a pro-crypto administration combined with a new chair may prompt the SEC to shift its stance and open the door to more products like this. This would not only benefit Ethereum but also inject confidence into the broader crypto market. Bitwise’s proposal might just be the first wave of this coming tide.

Market Response and Underlying Concerns

Following the proposal’s release, the market did not remain silent. Coingape.com observed a significant spike in trading volume as ETH hovered around $1,977, indicating investor attention on the potential impact of staking. FXStreet recorded a short-term ETH price surge of 3%—from $1,950 to $2,008—following Fidelity’s similar proposal, highlighting the market’s sensitivity.

Expert commentary quickly followed. Crypto analyst James Seyffart wrote on Twitter, “If staking is approved for ETFs, it could be a milestone in Ethereum’s path to mainstream adoption.” Other firms like Grayscale and 21Shares have also submitted similar proposals, reflecting the industry’s collective momentum toward this trend. Robert Mitchnick’s optimistic view added to market confidence, suggesting that staking functionality could secure Ethereum a firmer position in traditional finance.

However, with innovation comes risk. While staking offers yield, it can also expose investors to price volatility. If ETH prices drop sharply during the staking period, ETF net asset value (NAV) could be negatively impacted. For instance, in 2022, ETH fell from $3,000 to $1,000. Despite earning staking rewards, investors struggled to offset capital losses.

Furthermore, the SEC has yet to clarify its regulatory stance on staking within ETFs. Questions remain, such as whether additional disclosures will be required or how staking rewards will be treated for tax purposes. These issues must be resolved before implementation. That said, these risks are not unmanageable. Ethereum’s long-running network has proven its reliability, and Bitwise’s “point-and-click” method aims to reduce operational complexity and technical exposure.

If regulators and the market can work together to strike a balance between returns and security, the outlook for this proposal remains promising.

Conclusion

The story of the Bitwise Ethereum ETF and staking approval is like a slowly unfolding scroll. It offers Ethereum the potential for supply contraction, improved liquidity, enhanced network security, and deeper integration with traditional finance. While formal approval is still pending, the market’s anticipation is already sprouting like spring buds—poised to bloom.

As James Seyffart aptly put it, this could be a milestone moment for Ethereum’s mainstream journey. Whether you are an investor, a network participant, or an industry observer, there’s every reason to hold your breath in anticipation.

At the intersection of crypto and traditional finance, Ethereum is writing a new chapter. And this proposal is merely its prologue. Let’s wait for the spring to come—and watch how it blossoms.

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