News
Ether drops on ETF launches
Main conclusions
- Spot ether ETFs began trading in the US today, with these funds starting with collective assets under management of more than $10 billion.
- Analysts expect the launch of spot ether ETFs to be a net negative on the price of underlying ether in the short term due to expected outflows from the preexisting Grayscale Ethereum Trust.
- Spot bitcoin ETFs are still seeing strong inflows, with BlackRock’s IBIT recording over $500 million in inflows on Monday.
- Bitcoin and ether ETF issuer Franklin Templeton has invested in a project that aims to bring Ethereum technology to Bitcoin.
Nine-point ether exchange-traded funds (ETFs)) started to negotiate on the stock exchanges on Tuesday, but all the optimism ahead of its approval did not translate into gains for cryptocurrency markets.
Ether (ETH), the native cryptocurrency of the ethereum blockchain, was trading down less than 1% around the $3,400 level at 1:30 p.m. ET, while bitcoin (BTC) fell more than 2% to around $66,000.
Ether ETF Debut Not as Flashy as Bitcoin ETFs
Spot ether ETFs began trading with just over $10 billion in assets under management (AUM)), according to Bloomberg Intelligence analyst James Seyffart, with most of that money in the existing Grayscale Ethereum Trust (IT IS) which was converted into an ETF today.
“In the long term, Grayscale will simultaneously have the highest and lowest fees in the market. 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.
ETHE exits, if they occur, would be similar for those faced by Grayscale’s Bitcoin Trust (GBTC) after spot bitcoin ETFs began trading in January this year, likely due to the high fees of the two original funds. Grayscale’s existing fund charges fees of 2.5%, while a new “mini” ether ETF will charge 0.15% and fees for other ETFs are set at 0.25% or less.
These outflows could hurt the price of ether and market sentiment.
“There may be some resistance after the launch of Ethereum spot ETFs, i.e. outflows from the Grayscale Ether Trust may dampen market sentiment in a short space of time,” Jupiter Zheng, partner at Hashkey Capital Liquid Fund, told The Block.
But Grayscale remains optimistic.
“Relative to the splashy debut of spot Bitcoin ETPs in January, the launch of Ethereum ETPs has been comparatively muted,” said Grayscale’s head of research Zach Pandl, adding that investors may be “undervaluing” ether ETFs that “are coming to the U.S. market in conjunction with a shift in U.S. policy around cryptocurrencies and as major financial institutions embrace tokenization.”
Strong Bitcoin ETF inflows continue
When it comes to bitcoin, there is clearly no shortage of demand for spot ETFs like BlackRock’s iShares Bitcoin Trust (I BITE) had its sixth-largest day of inflows in its short history on Monday, with $526.7 million, according to data from Farside Investors. Daily inflows into the overall spot bitcoin ETF market were also at their highest level since June 5.
Notably, asset manager Franklin Templeton, which has issued bitcoin and ether ETFs, appeared to hedge its bets when it comes to Ethereum by investing in Bitlayer, which is a way to implement Ethereum’s technology on a second-layer Bitcoin network, according to CoinDesk.