Julie Bang / Investopedia
Important points
Spot ether ETFs began trading in the U.S. today, with total assets under management exceeding $10 billion.
Analysts expect the launch of spot ether ETFs to have a net negative impact on the underlying ether price in the short term due to expected outflows from the already existing Grayscale Ethereum Trust.
Spot bitcoin ETFs are still seeing strong inflows, with BlackRock’s IBIT alone seeing over $500 million in inflows on Monday.
Spot Bitcoin and Ethereum ETF issuer Franklin Templeton has invested in a project that aims to bring Ethereum’s technology to Bitcoin.
Nine spot ether exchange-traded funds (ETFs) began trading on exchanges on Tuesday, but not all the optimism ahead of their approval translated into gains for cryptocurrency markets.
Ether (ETH), the native cryptocurrency of the Ethereum blockchain, was trading at $3,400, down less than 1% as of 1:30 p.m. ET, while bitcoin (BTC) was down more than 2% to around $66,000.
Ether ETF Debuts Not As Flashy As Bitcoin ETFs
According to Bloomberg Intelligence analyst James Seyffart, spot ether ETFs began trading with just over $10 billion in assets under management (AUM), with most of that money held by the existing Grayscale Ethereum Trust (ETHE), which is converting to an ETF today.
“Over the long term, Grayscale will have the highest and lowest fees in the market at the same time. The asset manager’s decision to keep its ETHE fee at 2.5% could lead to outflows from the fund,” Kaiko Research said in a note on Monday.
The outflows from ETHE, if they happen, would be similar to the outflows that Grayscale’s Bitcoin Trust (GBTC) faced after spot bitcoin ETFs began trading in January of this year, likely due to high fees for the two original funds. Grayscale’s existing fund will charge 2.5%, while a new “mini” ether ETF will charge 0.15%, and fees for other ETFs are pegged at 0.25% or lower.
These outflows could negatively impact ether’s price and market sentiment.
“There could be a pullback shortly after the launch of Ethereum spot ETFs, meaning outflows from Grayscale Ether Trust could negatively impact market sentiment in the short term,” Jupiter Zheng, Partner at Hashkey Capital Liquid Fund, told The Block.
But Grayscale remains optimistic.
“Compared to the flashy launch of spot Bitcoin ETPs in January, the Ethereum ETP launch was relatively low-profile,” said Grayscale Head of Research Zach Pandl, adding that investors may be “under-appreciating” ether ETFs, which have been coming to the U.S. market “along with the shift in U.S. policy around crypto and the adoption of tokenization by major financial institutions.”
The story continues
Strong Bitcoin ETF Inflows Continue
On the bitcoin side, there’s clearly no shortage of demand for spot ETFs, as BlackRock’s iShares Bitcoin Trust (IBIT) saw its sixth-largest inflow day in its short history on Monday, with $526.7 million, according to data from Farside Investors. Daily inflows for the overall spot bitcoin ETF market were also the highest since June 5.
According to CoinDesk, asset manager Franklin Templeton, which has issued both Bitcoin and Ethereum ETFs, appears to have hedged its bets on Ethereum by investing in Bitlayer, a way to implement Ethereum’s technology into the second-layer Bitcoin network.
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