Yesterday’s launch of futures-based Ethereum (ETH) exchange-traded funds (ETFs) delivered disappointing results, with low trading volumes pointing to a lack of demand for ETH exposure.
Also a recent report from The Wall Street Journal report by The Wall Street Journal revealed that Monday’s launch of the first exchange-traded Ethereum funds generated little interest from retail investors.
These ETFs offered individual investors access to the second largest cryptocurrency through investment accounts. However, according to the report, most futures-based Ether ETFs ended the day in the red, with a combined trading volume of less than $2 million.
Red Flags for Ethereum ETFs?
The Ether ETFs, offered by leading asset managers such as ProShares, VanEck and Bitwise Asset Management, are entering a highly competitive market. Experts believe these funds will have to compete fiercely on costs and marketing strategies to attract investors amid the crowded landscape.
Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, expressed concerns about the funds, saying:
Many of these funds will struggle to obtain assets. There is probably only room for one stallion in this race.
During a Bloomberg TV appearance, Balchunas emphasized the relatively low trading volume of the Ethereum ETFs compared to BITO, a Bitcoin (BTC) ETF that tracks the price of BTC using Bitcoin Futures that launched in 2021.
Notably, the trading environment for the first futures-based Ether ETFs differs significantly from the first futures-based Bitcoin ETFs. ProShares’ first Bitcoin ETF (BITO) debut, which took place at the peak of the crypto bull market, was one of the most traded ETF launches ever.
Conversely, the traded value on the first day of trading of Ether futures ETFs reached almost $1.9 million by midday, with Valkyrie emerging as the frontrunner in the race for Ether futures ETFs. Initially focused on Bitcoin futures and later expanded to include Ether, the fund rose 3.9%.
VanEck’s EFUT managed to generate some volume by launching ahead of its competitors. However, volumes quickly declined, with as much as 49% of EFUT’s daily volume occurring within the first minute of trading.
Disappointing launch day for futures-based ETH
K33 Research Senior Analyst Vetle Lunde suggests that this lackluster launch points to more choppy market conditions ahead. The highly anticipated launch day did not meet market expectations, reminiscent of Bakkt’s disappointing debut.
This sheds light on a seemingly “non-existent” demand for additional cryptocurrency exposure, indicating a continuation of the current range of consolidation in the market.
In defense of the lackluster ETF launch, it’s worth noting that crypto ETF activity has been consistently shallow in recent months. For example, BITO has witnessed consistent outflows since mid-July and saw its third-lowest average daily volume (ADV) in September 2023, surpassed only by volumes in August and December 2022.
The Ethereum futures products launched on Monday include, along with their respective net expense ratios:
- 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 Strategy ETF (BETH) – 0.95%
- VanEck Ethereum Strategy ETF (EFUT) – 0.66%.
The disappointing debut of futures-based ETH ETFs underlines the challenges in generating substantial investor interest in crypto ETFs. As the crypto market continues to evolve, market participants will closely monitor developments and assess the impact on investor sentiment and the future of crypto ETFs.
Featured image from Shutterstock, chart from TradingView.com