The recent launch of futures-based Ethereum (ETH) exchange-traded funds (ETFs) left much to be desired, with shallow trading volumes indicating a deficiency in demand for ETH exposure. According to a report by The Wall Street Journal, the debut of the first Ethereum ETFs on Monday failed to generate significant interest from small investors. These ETFs were designed to provide individual investors with access to the second-largest cryptocurrency through brokerage accounts. However, most of the futures-based Ether ETFs ended the day in the red, with a combined trading volume of less than $2 million.
The Ether ETFs were offered by prominent asset management firms such as ProShares, VanEck, and Bitwise Asset Management, stepping into a highly competitive market. Experts believe that these funds will have to fiercely compete in terms of cost and marketing strategies to attract investors amidst the crowded landscape. Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, expressed concerns about the funds, stating that many of them would struggle to accumulate assets. Balchunas suggested that there might only be room for one standout performer in this race.
The trading environment for the first futures-based Ether ETFs differs significantly from that of the first futures-based Bitcoin ETFs. ProShares’ initial Bitcoin ETF (BITO) debut, which occurred during the peak of the crypto bull market in 2021, was one of the most highly traded ETF launches ever. In contrast, the inaugural trading day of Ether future ETFs saw a value traded of nearly $1.9 million by noon, with Valkyrie emerging as the frontrunner. However, the volumes quickly diminished, with 49% of VanEck EFUT’s daily volume occurring within its first trading minute.
Vetle Lunde, senior analyst at k33 research, believes that this lackluster launch indicates choppier market conditions ahead. The underwhelming debut of these ETFs brings back memories of the disappointing launch of Bakkt. It suggests that there might be a seemingly “non-existent” demand for additional crypto exposure, indicating a continuation of the current consolidation range in the market.
In defense of the lackluster ETF launch, it is worth noting that activity in crypto ETFs has consistently remained shallow in recent months. For example, BITO has experienced consistent outflows since mid-July and had its third-lowest average daily volume (ADV) in September 2023, only surpassing volumes in August and December 2022. This trend highlights the challenges in generating substantial investor interest in crypto ETFs.
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%
These disappointing debut of futures-based ETH ETFs sheds light on the challenges of generating substantial investor interest in crypto ETFs. As the crypto market continues to evolve, market participants will closely monitor developments and assess their impact on investor sentiment and the future of crypto ETFs.
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