• Ether is the native cryptocurrency on the Ethereum blockchain.
• While bitcoin is often pitched as a type of digital gold, ether is seen as more of a bet on the growth of the blockchain and crypto more broadly.
• Many of the funds set to launch this week have temporary fee waivers to attract clients.

Ether exchange-traded funds officially began trading in the U.S. on Tuesday, putting the world's second-largest crypto currency in a vehicle favored by many professional investors and advisors.

The new funds come from traditional fund issuers such as BlackRock and Fidelity and crypto-specific companies such as Grayscale, marking another step in the increased integration of digital assets into mainstream finance.

Ether is the native cryptocurrency on the Ethereum blockchain. While bitcoin is often pitched as a type of digital gold, ether is seen as more of a bet on the growth of the blockchain and crypto more broadly.

"Ethereum's appeal lies in its decentralized nature and its potential to drive digital transformation in finance and other industries," Jay Jacobs, U.S. head of active and thematic ETFs at BlackRock, said in a press release.

Bitcoin ETFs have raked in about $17 billion in net inflows since their launch in January, according to FactSet, a historically successful launch. The ether ETFs are widely expected to be smaller than the bitcoin funds, both because of the relative size of the two markets and the fact that ether may not be as familiar to many investors.

"Ethereum is just a bit more confusing and unclear for individual investors, as well as institutional investors," said Sam Callahan, senior analyst at Swan Bitcoin.

The ether ETFs also do not offer staking, which is a process that can give crypto-native investors additional yield.

Many of the funds set to launch this week have temporary fee waivers to attract clients. After the waivers, the management fees range between 0.15% and 2.50%.

Both the cheapest and most expensive funds come from Grayscale, which is effectively converting its multibillion-dollar private ether fund into two ETFs with different price points.

The price of ether is up more than 50% year to date but is roughly flat over the past month. The cryptocurrency does not seem to have enjoyed the same runup in demand ahead of the fund launches that bitcoin saw in January.

"I do think that overall the balance of risk is favorable considering the markets have pulled back and the sentiment overall is in a place where there's room to be pleasantly surprised," said Joel Kruger, strategist at LMAX Group.

The price of the cryptocurrency was down less than 1% on Tuesday.

The U.S. Securities and Exchange Commission has long been skeptical of cryptocurrencies, but the regulator lost a legal fight last year over bitcoin ETFs that led to their introduction in January. Since bitcoin and ether both already have regulated futures markets, the ether ETFs were seen as the next logical step for the industry.

The SEC's decision to allow the funds has been criticized by some, including the consumer advocacy group Better Markets.

Still, some investors and advisors could make small allocations to these crypto ETFs as a diversification play without taking on too much risk, said Wei Hu, vice president of financial research and strategy at Edelman Financial Engines.

"We don't believe an investor should hold a lot of either one of these," Hu said.