[DigitalToday reporter Jinju Hong (홍진주)] BlackRock will apply a 1-for-3 reverse split to its spot Ethereum exchange-traded fund (ETF), the iShares Ethereum Trust (ETHA). Investors’ asset value will not change, but the move is seen as aimed at raising the per-share price to narrow the bid-ask spread and improve trading efficiency.

On Aug. 5 (local time), blockchain media outlet CryptoSlate reported, citing a U.S. Securities and Exchange Commission (SEC) filing, that the ETHA manager approved the 1-for-3 reverse split on July 31. As of Oct. 5, three ETHA shares held by an investor will be consolidated into one share when adjusted trading begins on Nasdaq on Oct. 6.

A reverse split reduces the number of shares outstanding while raising the per-share price. The number of shares an investor holds falls, but the total asset value does not change. For example, assuming the ETH price does not change, an investor holding 300 shares (about $4,245) before the split will receive 100 shares afterward, with the total investment amount unchanged. Losses recorded this year also will not be recovered by the reverse split alone.

The move comes as ETHA’s share price has fallen. ETHA has dropped more than 37 percent this year to about $14.15 a share. Over the same period, Ethereum fell to about $1,900 from above $3,200 at the start of the year.

ETHA is the largest spot Ethereum ETF, with net assets of about $5.4 billion and cumulative net inflows of more than $11 billion. But its nominal share price remains lower than rival products. ETHA is trading at about $14.15, below Grayscale’s Ethereum ETF (about $18), Morgan Stanley’s MSSE (about $20) and VanEck’s ETHV (about $27).

Once the reverse split is completed, ETHA’s share price will rise to about $42.45 and shares outstanding will fall to about 128 million from about 384 million. BlackRock offered no separate explanation for the decision. The prospectus states the manager has the authority to carry out a reverse split if it determines the secondary-market trading price has moved outside an appropriate range.

Markets are focusing on the possibility that the change could lower trading costs. Bloomberg Intelligence ETF analyst Eric Balchunas said ETHA’s current bid-ask spread is about 7 basis points, but if the share price rises to around $42 after the reverse split it could shrink to about 2 basis points. He described it as an example showing that ETF managers view even very small execution costs as targets for improvement.

Balchunas also compared ETF trading costs with costs for retail investors to buy cryptocurrencies directly. He said exchanging dollars for bitcoin through hardware wallet provider Ledger involved costs of at least about 150 basis points, and Coinbase’s simplified purchase service offered costs of about 140 basis points. On that basis, Coinbase’s trading cost is about 70 times higher than the expected post-split spread for ETHA. Even assuming direct crypto trading costs of about 40 basis points, that is about 20 times ETHA’s expected spread.

ETFs and direct crypto holdings are used in different ways. An ETF is a financial product that lets investors gain exposure to Ethereum prices through a securities account, and it charges an annual management fee. Ethereum bought directly can be withdrawn to a personal wallet or used in on-chain services, and trading fees can vary depending on the exchange, payment method and trade size.

Markets say that even after taking those differences into account, ETHA’s trading-cost competitiveness is likely to strengthen further after the reverse split. Analysts say BlackRock’s move to adjust the price structure of the world’s largest spot Ethereum ETF is also a strategy to improve investors’ trading efficiency.