The recent launch of futures-based Ethereum (ETH) exchange-traded funds (ETFs) left much to be desired, as the trading volumes fell short, indicating a limited demand for ETH exposure. While prominent asset management firms like ProShares, VanEck, and Bitwise Asset Management entered the market with these ETFs, they are faced with fierce competition and the need to stand out in terms of costs and marketing strategies. This article delves into the underwhelming debut of these Ethereum ETFs and the challenges they face.
On the first day of trading, the futures-based Ether ETFs struggled to attract investors, with a combined trading volume of less than $2 million. The report by The Wall Street Journal revealed that small investors showed little interest in these ETFs, which aimed to provide access to the second-largest cryptocurrency through brokerage accounts. This lack of enthusiasm raises concerns about the demand for ETH exposure and highlights the need for these funds to compete aggressively.
Experts, such as Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, expressed their concerns regarding the struggle these funds may face in attracting assets. Balchunas believes that there is limited space for success in this race and that these funds will have to prove their worth amidst the crowded landscape. One point of comparison is the Bitcoin (BTC) ETF, BITO, which generated significant trading volume upon its launch, benefitting from the peak of the crypto bull market. In contrast, the Ethereum ETFs faced a less enthusiastic response.
The trading environment for the futures-based Ether ETFs was notably different from that of the Bitcoin ETFs. The initial debut of ProShares’ Bitcoin ETF (BITO) was highly traded, unlike the Ethereum ETFs. The trading volume for debut Ether future ETFs amounted to nearly $1.9 million by noon, with Valkyrie emerging as the frontrunner. VanEck’s EFUT managed to generate some volume by launching ahead of its competitors, but the volumes quickly dwindled.
The lackluster debut of the Ethereum ETFs suggests more challenging market conditions in the future. Vetle Lunde, a senior analyst of k33 research, believes that this disappointing launch points to a continuation of the current consolidation range in the market. It echoes the underwhelming debut of Bakkt, indicating a seemingly “non-existent” demand for additional crypto exposure.
It is worth noting that activity in crypto ETFs has been consistently shallow in recent months. Even BITO, the Bitcoin ETF, has witnessed consistent outflows since mid-July and experienced its third-lowest average daily volume in September 2023. This pattern indicates a lack of sustained interest from investors. The launch of the Ethereum ETFs is just a reflection of this overall trend in the market.
The disappointing launch of futures-based ETH ETFs highlights the challenges in generating substantial investor interest in crypto ETFs. With shallow trading volumes and limited interest from small investors, these funds must find ways to stand out amidst the competition. As the crypto market continues to evolve, market participants will closely monitor developments to assess their impact on investor sentiment and the future of crypto ETFs.
