The recent launch of futures-based Ethereum exchange-traded funds (ETFs) failed to live up to expectations, with shallow trading volumes indicating a lack of interest in ETH exposure. Despite the opportunity for individual investors to access the second-largest cryptocurrency through brokerage accounts, most of the Ether ETFs experienced losses on their debut, with a combined trading volume of less than $2 million. This disappointing start highlights the challenges faced by prominent asset management firms, including ProShares, VanEck, and Bitwise Asset Management, as they enter a highly competitive market. To attract investors in such a crowded landscape, these funds will need to compete fiercely in terms of cost and marketing strategies.
Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, expressed concerns regarding the ability of these funds to attract assets. Drawing a comparison with a Bitcoin ETF, Balchunas emphasized the relatively low trading volume of the Ethereum ETFs. The trading environment for the first futures-based Ether ETFs differs significantly from that of the first futures-based Bitcoin ETFs. When ProShares’ initial Bitcoin ETF (BITO) was launched during the peak of the crypto bull market, it became one of the most highly traded ETFs ever. In contrast, the value traded for Ether future ETFs amounted to just under $1.9 million by noon on their debut day. Valkyrie emerged as the frontrunner, experiencing a 3.9% increase, while VanEck’s EFUT managed to generate some volume by launching ahead of its competitors. However, volumes quickly dwindled, with 49% of EFUT’s daily volume occurring within its first trading minute.
The lackluster launch of the Ethereum ETFs may indicate more choppy market conditions in the future. This disappointing start recalls the underwhelming debut of Bakkt, suggesting a seemingly “non-existent” demand for additional crypto exposure. It also points to a continuation of the current consolidation range in the market, without significant market catalysts to drive substantial investor interest. This lackluster ETF launch is consistent with the consistently shallow activity in crypto ETFs over the past few months.
The disappointing debut of futures-based ETH ETFs underscores the challenges faced in generating substantial investor interest in crypto ETFs. Even the popular Bitcoin ETF, BITO, has witnessed consistent outflows since mid-July and has experienced its third-lowest average daily volume in September 2023. This trend indicates a lack of sustained demand for crypto ETFs, with volumes in August and December 2022 being the only periods lower than September 2023.
The Ethereum futures products launched on Monday, along with their respective net expense ratios, include:
– BitWise Ethereum Strategy ETF (AETH) – 0.85%
– Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP) – 0.85%
– ProShares Ether Strategy ETF (EETH) – 0.95%
– ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE) – 0.95%
– Bitcoin & Ether Market Cap Weight Strategy ETF (BETH) – 0.95%
– VanEck Ethereum Strategy ETF (EFUT) – 0.66%
As the crypto market continues to evolve, market participants will closely monitor developments and assess the impact on investor sentiment and the future of crypto ETFs. It remains to be seen whether the underwhelming launch of the Ethereum ETFs is indicative of a broader lack of interest in crypto investments or simply a temporary setback. The challenges in generating investor interest and the evolving regulatory landscape will shape the viability and success of crypto ETFs moving forward.
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