The NEOS Ethereum High Income ETF (NEHI) is fresh on the cryptocurrency ETF scene. However, this income-generating play on the second-largest digital currency may be relevant right out of the starting gates.
That might be hard to believe for some crypto investors who are once bitten and twice shy after a disappointing year in the cryptocurrency complex. After all, bitcoin — the largest digital currency — is on pace for just its fourth negative annual performance on record. A gloomy factoid to be sure, but it doesn’t imply investors should abandon crypto.
In fact, NEHI could be an ETF to consider over the near-term because data indicate that following a rash of cryptocurrency liquidations starting in October that invited bearish traders into the market, short sellers have been covering positions. That could portend that short sellers see limited near-term profit opportunity with ethereum.
Ether Technicals Could Support NEHI Upside
It’s important to remember that the newly minted NEHI is a covered call strategy — an actively managed one at that — so it won’t capture all of ether’s upside should a new bull market come calling. However, NEOS’s other established options-based ETFs have compelling track records of offering investors both some upside capture and high levels of income.
The ability to generate some upside is obviously noteworthy and pertinent because ether’s technical condition could portend a rally is imminent, as the cryptocurrency has formed an inverse head-and-shoulders pattern.
“Similar ascending channels in Ethereum have historically provided support during midterm corrections. Traders typically watch for higher lows and volume patterns to confirm potential rebounds, though these signals are less reliable during periods of low network participation,” reported Brave New Coin.
Another factor that helped NEHI surprise to the upside in its infancy is an upcoming gas limit increase arriving after the January 7 hard fork. That increase will take the gas limit to 80 million units from 60 million, increasing the ethereum network’s power while paring transaction costs.
“According to Christine Kim, VP of research at Galaxy Digital, developers are prepared to implement the change pending confirmation from the All Core Developers meeting. Barnabas Busa of the Ethereum Foundation noted that execution layer and consensus optimizations remain prerequisites,” added Brave New Coin.
As of December 17, NEHI had $8.6 million in assets under management. That’s a solid start for a two-week old ETF, particularly against the backdrop of declining crypto sentiment among retail investors.
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