Markets
Market is not favorable for ETFs or Ether tokens as volume exceeds $1 billion
Ether Coin, the native token for the Ethereum blockchain, sits atop gold-like coins like … [+] illustrate computer currencies.
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It was just a matter of time.
Just seven months after the first Bitcoin ETFs hit the market, the Securities and Exchange Commission (SEC) approved nine ETFs tracking the cryptocurrency Ether for trading on Tuesday. But the market has not been kind to the new products, as they have all posted significant losses in their first two days of trading.
Each ETF will track the spot price of Ether, the world’s second-largest cryptocurrency and the driving force behind the Ethereum blockchain. Total volume for the nine new ETFs topped $1.08 billion on their first day of trading, according to Bloomberg Intelligence.
“Bitcoin is seen as a store of value and a means of transmitting money from one party to another,” said Ric Edelman, founder of the Digital Assets Council of Financial Professionals. “Ethereum allows you to program the conditions for that transmission, so that the receiving party doesn’t get your money until they fulfill their obligation, such as sending you concert tickets you bought.”
The ability to program settlement conditions allows Ethereum to function like an escrow account, but without a human intermediary, Edelman continued. This makes it faster, safer, and cheaper, and can be used by virtually every industry in the world.
Despite speculation that Ether’s price would rise on the day of the ETF launch, the market has not been kind to either the token or the ETFs. Yesterday, Ethereum’s native token fell 1%. Today, Ether has fallen 4.4%, plunging below $3,400 to $3,322.33.
The drop could be the cliché buy the rumor sell the news. The expected launch seems to have been priced in by the market. Short-term investors may have used the day to take profits. Today’s drop could be related to the fact that the S&P 500 and Nasdaq had their worst day since 2022
“This is a positive for the cryptocurrency space, in my opinion: Some of this may go against the decentralized finance ethos that Bitcoin and Ethereum were built on, but ETFs don’t change anything per se about the underlying assets or protocols,” said James Seyffart, a research analyst at Bloomberg Intelligence. “What these ETFs do is open bridges between Ethereum and traditional financial markets.”
These bridges go from decentralized finance to more people and more capital who are either limited in purchasing actual cryptocurrency or do not want to deal with the multi-layered process. The ETF structure also brings regulatory clarity and acceptance by federal regulators, such as the SEC.
“The launch of spot Ether ETFs is another step toward greater mainstream adoption of cryptocurrency,” said Nate Geraci, president of The ETF Store, a registered investment advisor that offers only ETFs.
The nine ETFs
In addition to the new ETFs, Grayscale Investments has received SEC approval to convert its Grayscale Ethereum Trust (ETHE) into a spot ETF. Having been open since 2017, ETHE has become the largest spot Ether ETF with $9.19 billion in assets under management as of July 23. On Tuesday, it lost 0.6% on the largest volume of all Ether ETFs, $463.2 million. Today, it is down 2.5% to 28.62. It still charges the same high expense ratio it did as a legacy trust, 2.5%.
The firm also launched a second “low-cost” fund, the Grayscale Ethereum Mini Trust (ETH), seeded with 10% of ETHE’s underlying Ethereum, or about $1.02 billion. It began the day as the second-largest spot Ethereum ETF. On its first day of trading, it fell 0.9% to $3.27 on volume of $63.8 million. Today, it has fallen 3% to $3.17. For the first six months of trading, the expense ratio will be 0%. After the six-month period, or when the fund reaches $2.0 billion in assets, the fee will be 0.15%.
Blackrock’s iShares Ethereum Trust (ETHA) had the second-highest volume on Tuesday, at $249.1 million. It fell 1.3% on its first day of trading and plunged 2.8% to $25.50 on its second. ETHA will charge a 0.25% expense ratio, with a one-year waiver reducing the fee to 0.12% on the first $2.5 billion in assets under management.
Fidelity Ethereum Fund (FETH) fell 1.1% on $137.3 million in volume on its first day of trading. Today, it is down 2.9% to $33.67. FETH will waive its expense ratio for the rest of the year, then charge 0.25%.
Bitwise Ethereum ETF (ETHW) fell 1.3% on $94.3 million in volume yesterday. It fell another 2.8% to $24.15 on Wednesday. ETHW has a 0.20% management fee, with the fee set at 0% for the first six months on the first $500 million in assets.
VanEck Ethereum ETF (ETHV) returned 1.8% on $44.8 million in volume yesterday. It also fell 2.8% to $49.27 today. The expense ratio will be waived until July 22, 2025, for the first $1.5 billion of the Trust’s assets. After that, the fee will be 0.20%.
Franklin Ethereum ETF (EZET) fell 1.1% on $15.9 million in volume yesterday. It fell 2.9% to $25.58 today. The sponsor will waive the expense ratio until January 31, 2025, for the first $10.0 billion of the fund’s assets. After that, it will return to 0.19%.
Invesco Galaxy Ethereum ETF (QETH) fell 1.5% on $12.5 million yesterday. Today it is down 2.9% to $33.64. The expense ratio for this fund is 0.25%, there is no waiver.
And with volume at a low of $8.6 million yesterday, the 21Shares Core Ethereum ETF (CETH) fell 2.5% to $17.29. Today, it fell 2.8% to $16.80. The fund will waive its entire management fee until January 23, 2025, or until assets reach $500 million, whichever comes first. Then it will return to 0.21%.
All prices from Yahoo! Finance. All volume numbers from Bloomberg Intelligence
ETF Store’s Geraci says investors should focus on five key factors when selecting among the nine ETFs: expense ratio, liquidity (trading spreads and premiums/discounts), assets under management, performance, and the ability of an ETF issuer to provide cryptocurrency education. Since all of these ETFs hold exactly the same amount of Ether, small differences in items like fees and performance could tip the scales in favor of one ETF over the others.”
“I think it’s important to highlight the launch of the ETH ETF as a turning point,” said Federico Brokate, head of 21Shares’ U.S. business. “It represents further confidence in the asset class from the SEC and serves as further evidence of the broader momentum and adoption of cryptocurrencies.”