Introduction
The first US ETFs that invest directly in Ether are making a big splash. On their first day, they saw over $500 million in trading volume. While this is not as high as the $4.6 billion traded during the launch of Bitcoin ETFs, it is still a strong start.
High Trading Volume for Ether ETFs
Nine exchange-traded funds (ETFs) traded more than half a billion dollars within a few hours of the market opening. Several of these funds are set to finish among the top 50 highest-traded US ETF debuts of all time.
BlackRock’s iShares Ethereum Trust ETF (ticker ETHA) saw $119 million worth of shares traded by 12:30 p.m. in New York. This makes it the 38th-highest first-day traded value, according to Bloomberg Intelligence. Another product, Bitwise Asset Management’s ETF (ETHW), also saw solid demand with over $64 million in turnover. Grayscale’s Ethereum Trust, which converted into an ETF, traded around $220 million at the same time.
Comparing Ether ETFs to Bitcoin ETFs
“It’s a similar audience for the Ether ETFs and Bitcoin ETFs,” said Drew Walsh, Vice President of Research and Operations at Roundhill Financial. “It’s not a crypto-native audience. It’s people new to the asset class who want exposure to cryptocurrencies.”
Fee War Among Ether ETFs
To attract investors, fund companies are using low fees. However, trading volume alone doesn’t indicate whether investors are buying or selling. Because of how these funds settle trades, net flows into or out of the products may not be known until later in the week.
Launch After Bitcoin ETFs
The Ether ETFs were launched after the first US spot Bitcoin ETFs debuted in January. Those Bitcoin ETFs saw billions of dollars in inflows. Predictions for how much cash Ether funds could bring in vary. Some analysts say one-year flows could range between $4.8 billion to $6.4 billion. But Wintermute analysts project lower demand, estimating flows between $3.2 billion and $4 billion. Bloomberg Intelligence analysts see Ether-ETF flows amounting to roughly 20% of those from Bitcoin funds.
Investor Adoption of Ether ETFs
Christopher Jensen, head of digital assets research at Franklin Templeton, believes investor adoption of Ether ETFs could happen faster. Many investors have already tried Bitcoin funds that launched earlier this year. His team predicts overall flows for spot-Ether ETFs to be about 30% of spot-Bitcoin ETF flows, given that Bitcoin’s market cap is three times larger than Ether’s.
“People have already done some of their homework and many have dipped their toes in. This would be a way to diversify into this new asset class,” Jensen said.
Bitcoin’s First-Mover Advantage
Bitcoin has a first-mover advantage, says Citigroup’s Alex Saunders. It is easier to understand as “digital gold.” Many investors who already hold Bitcoin ETFs may not feel the need to diversify into Ether ETFs. Saunders expects the potential for Ether fund flows to be between $4.7 billion and $5.4 billion.
Conclusion
The debut of Ether ETFs has been strong, with high trading volumes and significant investor interest. While they have not yet matched the debut of Bitcoin ETFs, they are off to a promising start. The fee war among fund companies and investor adoption rates will be key factors to watch in the coming months.
