How Did Ether ETFs Do on Day One?

After months of rejections and delays by the SEC, exchange-traded funds based on Ether’s spot price finally launched in the U.S. on July 23.

Markets had long regarded their debut as something of an inevitability, meaning this event had already been priced in by investors.

A grand total of nine ETFs tracking the world’s second largest cryptocurrency were available for investors to choose from, with cut-throat competition when it came to cost.

That is, with the exception of the Grayscale Ethereum Trust. This long-established vehicle is now being converted into an ETF, and commands pretty eye-watering fees of 2.5%.

Given this is substantially more than rivals, we’re already beginning to see large outflows from Grayscale as pundits move to funds launched by BlackRock and Fidelity.

Bitcoin ETFs have enjoyed a barn-storming performance over the past six months — and data from SoSo Value shows these products have attracted cumulative total net inflows of $17.46 billion since January.

But in the run-up to their Ether counterparts launching, some analysts had sought to manage expectations — warning that there might not be as much appetite here.

Wintermute predicted that annualized inflows across ETH ETFs for the whole first year may be as low as $4 billion, contributing to a price increase of 18%.

Some of the challenges standing in Ether’s way include a lack of brand recognition when compared with Bitcoin.

And given these ETFs fail to offer staking rewards — referring to the process of locking the cryptocurrency away and receiving compensation for helping secure the network — demand might be pretty tepid.

Despite the gloomy forecasts, these new exchange-traded funds did end up delivering a pretty robust performance on their first day.

BlackRock’s iShares Ethereum Trust ETF led the charge with a healthy $266.55 million in inflows, with the Bitwise Ethereum ETF also pulling in an impressive $204 million.

That safely puts these funds in the record books as among the highest traded ETF debuts in U.S. history.

But YouHodler risk manager Sergei Gorev cautioned that the next few weeks could look pretty choppy for Ether ETFs, telling Cryptonews:

“There is a huge possibility that the buy-on-hearsay and sell-on-facts scenario can be realized. The timing of the launch could have been more ideally chosen since, right now, many investors are on vacation. And the market is relatively thin at such moments.”

Another big winner following the launch is Coinbase, which is serving as a partner and custodian for eight of the nine ETH ETFs now trading on Wall Street. Tom Duff Gordon, the exchange’s VP for international policy, told Cryptonews:

“The approval of spot ETH ETFs marks a significant milestone in the crypto ecosystem, emphasizing the ongoing shift towards the global transition to digital assets. Coinbase has championed regulatory clarity since our inception, and this milestone further validates our position as crypto’s presence is made mainstream in economies across the globe. This development highlights that crypto is not merely a trend; it illustrates the transformative digital shift in the financial system.”

Zooming out, and it’s worth reflecting on who is buying Ether ETFs. Generally speaking, it isn’t crypto enthusiasts who will be eagerly snapping up shares. They’ll already have some ETH sitting pretty in their wallet, with many signing up to staking programs to generate some yield and make their coins work for them.

Instead, what’s driving the demand we’ve seen so far are crypto-curious consumers who want to enjoy the potential upside of ETH’s price movements without going through the hassle of signing up with an exchange and holding digital assets for themselves.

So far this year, Ether’s price has accelerated by an impressive 51.6%. That’s slightly less than Bitcoin’s gains of 57% since January, but ETH has managed to repeatedly outperform the world’s biggest cryptocurrency in recent years.

And while BTC is currently trading at a 9.9% discount to all-time highs of $73,750 set in March — two months after Bitcoin ETFs launched — ETH remains 30% below a record price of $4,891 set in November 2021 as an extraordinary bull run juddered to a halt.

It’ll be interesting to see whether a greater number of investors on Wall Street ape into ETH ETFs as they vie to diversify their portfolios — and whether fund issuers will now embark on yet another tangle with the SEC as they push for funds mirroring smaller altcoins.

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