THE first US exchange-traded funds (ETFs) that invest directly in Ether made strong debuts, with some seeing relatively high trading volumes for their opening sessions.
Over US$1 billion shares were traded between the nine exchange-traded funds. While that’s far from the US$4.6 billion traded during the launch of spot Bitcoin ETFs in January, it’s still a robust start for first-day ETFs. Several of the funds are finishing the day among the top 50 highest-traded US ETF debuts of all time.
BlackRock’s iShares Ethereum Trust ETF saw US$248 million of shares exchange hands, clocking one of the highest-ever first-day traded values, according to Bloomberg Intelligence. Grayscale’s Ethereum Trust, which converted into an ETF, traded around US$458 million, ranking it among the 25 best ever. A product from crypto-native firm Bitwise Asset Management, meanwhile, also saw solid demand, with turnover exceeding US$94 million.
“It’s a similar audience for the Ether ETFs and Bitcoin ETFs,” said Roundhill Financial vice president of research and operations Drew Walsh. “It’s not a crypto-native audience. It’s people that are new to the asset class and want exposure to cryptocurrencies.”
Trading volume does not indicate buying or selling or investor inflows. Because of the way the funds settle trades, net flows into or out of the products may not be known until at least on Wednesday (Jul 24).
“It’s been an incredible reaction, to be honest,” Matt Hougan, chief investment officer at Bitwise, said. “It’s exceeded my expectations.”
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The Ether launches come after the first US spot Bitcoin ETFs debuted in January with much fanfare and billions of US dollars in inflows overall. Forecasts for how much cash Ether funds could rake in vary, with analysts saying that one-year flows could range between US$4.8 billion to US$6.4 billion, according to Wintermute. But analysts at Wintermute said that demand could be lower than anticipated – they project flows amounting to between US$3.2 billion and US$4 billion. Meanwhile, analysts at Bloomberg Intelligence see Ether-ETF flows amounting to roughly 20 per cent of those notched by the Bitcoin funds.
Christopher Jensen, head of digital assets research at Franklin Templeton, said that investor adoption of Ether ETFs could happen at a quicker pace because many have already had a chance to dabble with the Bitcoin funds that launched earlier this year. His team sees overall flows for the spot-Ether ETFs potentially totalling about 30 per cent of spot-Bitcoin ETF flows given that Bitcoin’s market cap, at over US$1.3 trillion, is around three times larger than that of Ether’s.
“People have already done some of their homework and many have already dipped their toes in, so this would be a way to diversify into this new asset class,” he said.
Still, Bitcoin has a first-mover advantage, said Citigroup’s Alex Saunders in a note, adding that it “has an easier-to-understand use case as akin to ‘digital gold’”. Existing allocations to spot Bitcoin ETFs could fulfil many investors’ desires for crypto exposure. “Given the high correlations BTC and ETH, some allocations may be split or even just left as exposure to the original crypto token,” he wrote. Saunders expects between US$4.7 billion and US$5.4 billion likely representing “the ceiling on potential” for Ether fund flows.
The price of Ether was little changed for a third straight day, falling less than 1 per cent to US$3,481. The native token of the Ethereum blockchain has rallied about 50 per cent so far this year. BLOOMBERG
