Markets
US Spot Ether ETFs Debut on the Market, Another Victory for the Cryptocurrency Industry
The first U.S. exchange-traded funds (ETFs) tied to the price of ether, the world’s second-largest cryptocurrency after bitcoin, began trading Tuesday, in another watershed moment for the cryptocurrency industry’s push to go mainstream.
Ether ETFs from VanEck, Franklin Templeton, Fidelity, 21Shares, and Invesco have begun trading on Cboe, while one from BlackRock has begun trading on the Nasdaq. Products from Bitwise and Grayscale Investments have also begun trading on the New York Stock Exchange.
“This is a real game-changer for the industry,” said Andrew Jacobson, chief legal officer at 21Shares.
Following the launch of nine spot bitcoin ETFs in the U.S. in January, the ether products mark another victory for the cryptocurrency industry’s push to push digital assets into the broader financial sector, although the products are unlikely to attract the same volume of inflows, analysts said.
The launch of Bitcoin ETFs was the culmination of a decade-long battle with the U.S. Securities and Exchange Commission, which rejected the products over concerns about market manipulation.
The agency was forced to greenlight the ETFs after losing a court challenge by digital asset manager Grayscale Investments, despite warning at the time of approval that the products were still highly risky.
The launch was one of the most successful in the history of the ETF market: according to Morningstar Direct data, the products attracted net inflows of $33.1 billion by the end of June.
Bitcoin ETF issuers have been battling hard over fees, with many firms offering to waive fees entirely for a period of time.
Ether ETF fees range from 0.19 percent for Franklin Templeton’s Ether ETF to as high as 2.5 percent for Grayscale’s Ethereum Trust, which is converting to an ETF, according to its public offering filings. The rest are around 0.25 percent.
Overall, fees are comparable to those of Bitcoin products, although issuers offer fewer exemptions.
Grayscale is also launching a “mini” version of its ether ETF with a fee of just 0.15%.
While estimates of demand for ether-based products vary widely, Galaxy Research, whose affiliate Galaxy Asset Management has an ether ETF pending with Invesco, has predicted that ether-based ETFs could attract $1 billion in monthly inflows.
“In general, market participants expect strong interest in spot ETH ETFs and significant inflows in the first 3-6 months after launch,” Matteo Greco, research analyst at Fineqia International, wrote in a note. He added that demand for ether ETFs will be key to ascertaining investor appetite for digital assets beyond bitcoin.
Issuers began filing for ether ETFs in September. Executives initially had little hope that the SEC would approve the products after discouraging meetings with officials.
But the agency surprised the industry in May when it approved rule changes required to allow exchanges to list products, the first of two major regulatory hurdles.
SEC Chairman Gary Gensler told Reuters last month that the Grayscale ruling had influenced his thinking about approving ether-based products because the underlying market circumstances were similar.
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