BlackRock’s spot Ether exchange-traded fund, iShares Ethereum Trust (ETHA), will carry out a 1-for-3 reverse split in October, according to an Aug. 5 post on X from Bloomberg senior ETF analyst Eric Balchunas. He said the move would take the share price from about $14 to roughly $42 and reduce trading spread costs from around 7 basis points to about 2 basis points.
Balchunas used the announcement to make a broader point about cost differences between ETFs and crypto exchanges. In his words, ETF issuers treat a 7 bps spread as a problem that needs to be fixed, while crypto exchanges are charging something closer to 140 bps. He described the two markets as operating in very different worlds.
Why a reverse split can lower spread costs
A reverse split combines multiple shares into one. In ETHA’s case, every three shares held by an investor would become one share, while the share price would rise by the same factor. The investor’s total position value would stay the same, and the move would not materially change the fund’s net asset value or investor rights.
The mechanism matters because U.S. stocks trade with a minimum tick size of $0.01. If an ETF is priced at $14, even a 1-cent bid-ask spread works out to about 7 bps. At $42, that same 1-cent spread falls to a little over 2 bps.
So the reverse split does not change ETHA’s fundamentals. What it does is raise the per-share price and dilute the impact of that fixed 1-cent spread, cutting the implicit cost of entering and exiting the fund by about two-thirds.
Balchunas contrasts ETF pricing with crypto exchange costs
Balchunas’ larger point was about cost culture. In the ETF market, a 7 bps spread is already enough for an issuer to respond with a formal corporate action. In crypto, by contrast, the all-in cost for retail users converting dollars into digital assets — fees plus spread — can easily run into triple-digit basis points, according to his remarks.
One user replying to the post disputed the 140 bps figure, saying their cost was only 40 bps. Balchunas answered that even 40 bps would still be “crazy” by ETF standards. He added that he had personally tried to buy Bitcoin for research and found that, through several exchanges accessed via the Ledger app, the cheapest cost to convert dollars into BTC was still 150 bps.
What the cost gap says about spot crypto ETFs
The report said the “7 bps versus 140 bps” comparison helps explain why spot crypto ETFs have continued to draw large amounts of retail and institutional capital away from exchanges since launch. For investors who simply want to hold a position and do not need onchain utility, ETFs offer lower trading friction along with the convenience of a traditional brokerage account.
That does not mean exchanges and ETFs serve the same purpose. Buying crypto directly on an exchange also gives users access to self-custody, onchain transfers and DeFi applications that ETFs cannot offer. Part of the higher cost structure reflects those additional functions.
Still, if major traditional asset managers are willing to act over a 7 bps spread, exchanges may face rising pressure on fees if they want to keep buy-and-hold users.