Ethereum
Market Not Kind Toward ETFs or Ether Tokens as Volume Surpasses $1 Billion
Ether coin, the native token of the Ethereum blockchain, is based on gold coins similar to… [+] illustrate cybercurrencies.
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It was really just a matter of time.
Just seven months after the first Bitcoin spot ETFs hit the market, the Securities and Exchange Commission (SEC) on Tuesday approved nine ETFs tracking the cryptocurrency Ether for trading. But the market hasn’t been kind to the new offerings, as they 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 across the nine new ETFs topped $1.08 billion on their first day of trading, according to Bloomberg Intelligence.
“Bitcoin is considered a store of value and a way to transfer money from one party to another,” said Ric Edelman, founder of the Digital Assets Council of Financial Professionals. “Ethereum allows you to program the terms of that transfer, so the receiving party doesn’t receive your money until they fulfill their obligation, such as sending you the concert tickets you bought.”
The ability to program settlement terms allows Ethereum to function like an escrow account, but without human intermediaries, Edelman continued. This makes it faster, more secure, and cheaper, and can be used by virtually every industry in the world.
Despite the assumption that the price of Ether would rise on the day of the ETF launch, the market has not been kind to the token or the ETFs. Yesterday, Ethereum’s native token fell 1%. Today, Ether plunged 4.4%, falling below $3,400 to $3,322.33.
The decline could be the cliché of buying the rumor and selling the news. The early launch appears to have been priced into the market. Short-term investors may have taken advantage of the day to take profits. Today’s decline could be related to the S&P 500 and Nasdaq having their worst day since 2022
“This is a positive for the cryptocurrency industry in my opinion – some elements may go against the ethos of decentralized finance that Bitcoin and Ethereum were founded on – but ETFs don’t change the underlying assets or protocols,” said James Seyffart, a research analyst at Bloomberg Intelligence. “These ETFs are building bridges between Ethereum and traditional financial markets.”
These gateways make it possible to bring decentralized finance to a wider range of people and capital who are not allowed to buy real cryptocurrencies or who do not want to deal with the multi-layered process. The ETF structure also provides regulatory clarity and acceptance by federal regulators, such as the SEC.
“The launch of Ether spot ETFs is another step on the path to broader 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 was down 0.6% on the most volume of any Ether ETF, $463.2 million. Today, it is down 2.5% to $28.62. It still charges the same high expense ratio as a traditional trust, 2.5%.
The firm also launched a second “low-cost” fund, the Grayscale Ethereum Mini Trust (ETH), whose initial seed consists of 10% of ETHE’s underlying Ethereum, or about $1.02 billion. It started the day as the second-largest spot Ethereum ETF. On its first day of trading, it fell 0.9% to $3.27 on $63.8 million in volume. Today, it’s down 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 dropped 2.8% to $25.50 on its second day. ETHA will charge an expense ratio of 0.25%, with a one-year waiver reducing the fee to 0.12% on the first $2.5 billion in assets under management.
The Fidelity Ethereum Fund (FETH) fell 1.1% on $137.3 million in volume on its first day of trading. Today, it fell 2.9% to $33.67. FETH will waive the expense ratio for the remainder of the year, after which it will charge 0.25%.
The Bitwise Ethereum ETF (ETHW) fell 1.3% on $94.3 million in volume yesterday. On Wednesday, it fell another 2.8% to $24.15. ETHW has a management fee of 0.20%, set at 0% for the first six months on the first $500 million in assets.
The VanEck Ethereum ETF (ETHV) lost 1.8% on $44.8 million in volume yesterday. Today, it also fell 2.8% to $49.27. The expense ratio will be waived until July 22, 2025 for the first $1.5 billion in assets in the Trust. After that, the fee will be 0.20%.
The Franklin Ethereum ETF (EZET) fell 1.1% on $15.9 million in volume yesterday. Today, it slid 2.9% to $25.58. The sponsor will waive the expense ratio through January 31, 2025, for the first $10.0 billion in assets in the fund. After that, it reverts to 0.19%.
The Invesco Galaxy Ethereum ETF (QETH) was down 1.5% on $12.5 million in volume yesterday. Today, it is down 2.9% to $33.64. The expense ratio for this fund is 0.25%, there are no waivers.
And with the lowest volume yesterday at $8.6 million, the 21Shares Core Ethereum ETF (CETH) fell 2.5% to $17.29. Today, it plunged 2.8% to $16.80. The fund will waive the entire management fee until January 23, 2025, or until assets reach $500 million, whichever comes first. After that, it reverts to 0.21%.
All prices are from Yahoo! Finance. All volume figures are from Bloomberg Intelligence
Geraci of the ETF Shop explains that investors should focus on five key factors when choosing among the nine ETFs: expense ratio, liquidity (trading spreads and premiums/discounts), assets under management, performance, and an ETF issuer’s ability to provide cryptocurrency education. Since these ETFs all hold the exact same asset in Ether, small differences in things 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 an inflection point,” said Federico Brokate, head of 21Shares’ U.S. business. “It represents further comfort from the SEC toward the asset class and is further evidence of the broader momentum and adoption of cryptocurrencies.”