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Ether ETFs trade over $1 billion in strong crypto fund debut
(Bloomberg) — The first U.S. ETFs that invest directly in ether have had strong debuts, with some posting relatively high trading volumes in their opening sessions.
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More than $1 billion worth of shares were traded between the nine exchange-traded funds. While that’s a far cry from the $4.6 billion traded when the spot Bitcoin ETFs launched in January, it’s still a solid start for first-day ETFs. Several of these funds ended the day among the top 50 most-traded U.S. ETFs of all time.
BlackRock’s iShares Ethereum Trust ETF (ticker ETHA) saw $248 million in shares traded, one of the highest first-day values ever, according to Bloomberg Intelligence. Grayscale’s Ethereum Trust, which converted into an ETF, traded around $458 million, putting it among the top 25 ever traded. A product from cryptocurrency-native Bitwise Asset Management Inc. (ETHW), meanwhile, also saw strong demand, with turnover topping $94 million.
“The target audience is similar for both Ether and Bitcoin ETFs,” said Drew Walsh, vice president of research and operations at Roundhill Financial. “This is not a crypto-native audience. This is people who are new to the asset class and want exposure to cryptocurrencies.”
Trading volume does not indicate purchases or sales, or investor inflows. Because of the way funds settle trades, net flows into or out of products may not be known until at least Wednesday.
“To be honest, the response has been incredible,” Matt Hougan, chief investment officer at Bitwise, said in an interview on Bloomberg TV. “It’s exceeded my expectations.”
The Ether launches come after the first U.S. Bitcoin ETFs made a splash in January, with billions of dollars in total inflows. Forecasts for how much cash the Ether funds could bring in vary, with analysts saying one-year flows could be between $4.8 billion and $6.4 billion, according to Wintermute. But Wintermute analysts say demand could be lower than expected — they predict flows of between $3.2 billion and $4 billion. Meanwhile, Bloomberg Intelligence analysts estimate that Ether ETF flows are about 20% of those seen by Bitcoin funds.
Christopher Jensen, head of digital asset research at Franklin Templeton, believes that investor adoption of Ether ETFs could happen at a faster pace, as many have already had a chance to dabble in Bitcoin funds launched earlier this year. His team estimates that overall flows for spot Ether ETFs will potentially total about 30% of flows for spot Bitcoin ETFs, given that Bitcoin’s market cap, at over $1.3 trillion, is about three times that of Ether.
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“People have already done some of their homework and many have already dipped their toes, so this would be a way to diversify into this new asset class,” he said in a telephone interview.
Still, Bitcoin has the advantage of being the first mover, Citigroup’s Alex Saunders said in a note, adding that it “has a more easily understood use case, like digital gold.” Existing allocations to spot Bitcoin ETFs could meet many investors’ desires for cryptocurrency exposure. “Given the strong correlations between BTC and ETH, some allocations can be split or even simply left as exposure to the original crypto token,” he wrote. Saunders expects that between $4.7 billion and $5.4 billion is likely “the ceiling of potential” for Ether fund flows.
The price of Ether was little changed for the third straight day, falling less than 1% to $3,481. The native token of the Ethereum blockchain is up about 50% since the start of the year.
–With assistance from Benjamin Taubman and María Paula Mijares Torres.
(Data updated throughout.)
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