What Was the Performance of Ether ETFs on Their First Day?

After several months of refusals and postponements by the SEC, exchange-traded funds linked to Ether’s spot price officially launched in the U.S. on July 23.

Markets had long anticipated their arrival as a foregone conclusion, indicating that this occurrence had already been factored into investor expectations.

A total of nine ETFs tracking the second largest cryptocurrency globally were made available for investors, with fierce competition regarding fees.

However, the Grayscale Ethereum Trust stands apart. This well-established vehicle is currently transitioning into an ETF and charges notably high fees of 2.5%.

Since this is considerably higher than its competitors, we are already witnessing significant outflows from Grayscale as investors shift to funds introduced by BlackRock and Fidelity.

Bitcoin ETFs have experienced remarkable performance over the past six months — and data from SoSo Value indicates these products have garnered cumulative net inflows of $17.46 billion since January.

Yet, leading up to the launch of their Ether counterparts, some analysts aimed to temper expectations — cautioning that the demand might not be as strong.

Wintermute projected that annualized inflows for ETH ETFs in the first year could be as low as $4 billion, potentially resulting in an 18% price increase.

Some obstacles facing Ether include a lack of brand recognition compared to Bitcoin.

Additionally, since these ETFs do not provide staking rewards — which involve locking up the cryptocurrency and earning compensation for securing the network — demand may be relatively subdued.

Despite the pessimistic forecasts, these new exchange-traded funds performed quite well on their inaugural day.

BlackRock’s iShares Ethereum Trust ETF led the way with a substantial $266.55 million in inflows, while the Bitwise Ethereum ETF also attracted a noteworthy $204 million.

This positions these funds among the highest traded ETF launches in U.S. history.

However, YouHodler risk manager Sergei Gorev warned that the upcoming weeks could be turbulent for Ether ETFs, stating to Cryptonews:

“There is a huge possibility that the buy-on-hearsay and sell-on-facts scenario can be realized. The timing of the launch could have been more ideally chosen since, right now, many investors are on vacation. And the market is relatively thin at such moments.”

Another significant beneficiary of the launch is Coinbase, which is acting as a partner and custodian for eight of the nine ETH ETFs currently trading on Wall Street. Tom Duff Gordon, the exchange’s VP for international policy, remarked to Cryptonews:

“The approval of spot ETH ETFs marks a significant milestone in the crypto ecosystem, emphasizing the ongoing shift towards the global transition to digital assets. Coinbase has championed regulatory clarity since our inception, and this milestone further validates our position as crypto’s presence is made mainstream in economies across the globe. This development highlights that crypto is not merely a trend; it illustrates the transformative digital shift in the financial system.”

Looking at the broader picture, it’s important to consider who is purchasing Ether ETFs. Generally, it isn’t crypto enthusiasts who will be eagerly acquiring shares. They likely already possess some ETH in their wallets, with many participating in staking programs to generate yield and maximize their holdings.

Instead, the current demand appears to be driven by crypto-curious consumers who wish to benefit from potential ETH price movements without the complexities of registering with an exchange and managing digital assets themselves.

So far this year, Ether’s price has surged by an impressive 51.6%. This is slightly less than Bitcoin’s increase of 57% since January, but ETH has consistently outperformed the largest cryptocurrency in recent years.

While BTC is presently trading at a 9.9% discount from its all-time high of $73,750 set in March — two months after Bitcoin ETFs were launched — ETH remains 30% below its peak price of $4,891 reached in November 2021 as an extraordinary bull run came to a halt.

It will be intriguing to observe whether a larger number of investors on Wall Street will invest in ETH ETFs as they seek to diversify their portfolios — and whether fund issuers will engage in further discussions with the SEC as they advocate for funds that track smaller altcoins.

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