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The wait is over. Ethereum ETFs are finally going live on exchanges today. Six months after Bitcoin ETFs launched on US exchanges, ETH ETFs will now be unleashed onto the world.
As of yesterday afternoon, the US Securities and Exchange Commission (SEC) has allowed registration forms from 21Shares, Bitwise, BlackRock, Fidelity, Franklin Templeton, VanEck and Invesco Galaxy, as well as Grayscale Ethereum Trust and the Grayscale Ethereum Mini Trust.
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Offering TradFi a piece of the Ethereum ecosystem serves as yet another tether between old, antiquated financial systems and the new, shiny, revolutionary blockchain-based financial structures.
ETH-citement
After months of back and forth with the SEC, the industry's excitement for ETH ETFs has only intensified.
Initially expected to launch on 2 July, the fate of the Ethereum ETF launch was pushed back after the regulator returned the S-1 forms to prospective ETH ETF issuers.
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But the excitement isn't unwarranted. As Coinbase’s APAC managing director, John O’Loghlen, explained, “The approval of spot Ethereum ETF is yet another pivotal milestone for digital assets. Solidifying ETH as a non-security is a seminal moment for the industry and indicates more broadly the acceptance and integration of crypto within traditional finance markets."
O'Loghlen revealed that Coinbase is providing ETH ETF issuers with "a full suite of Prime products similar to spot BTC ETF issuers, including custody, trading, and financing."
Lasanka Perera, CEO of Independent Reserve SG, told Blockhead how the products will help to support Ethereum's value.
"The influx of institutional capital reduces the likelihood of Ethereum's value dropping to zero, increasing investors' confidence in ETH. ETH then becomes a more attractive diversification option, hedging against risks in other markets," he said.
"It’s still early days, but the demand for ETH is likely to skyrocket, pushing prices to new ATHs."
Lessons From Bitcoin ETFs
Since the launch of Bitcoin ETFs back in January, the products have attracted over $16 billion in inflows. BlackRock's IBIT, one of the strongest Bitcoin ETF offerings, broke records by reaching $10 billion faster than any US ETF in history.
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Bitcoin ETFs have certainly proven their worth and excitement extending to Ethereum ETFs is understandable. However, despite the success Bitcoin ETFs had in the US, the products were less successful in other markets.
Unable to mirror the glamour of its American peers, Hong Kong's crypto ETFs reeled in just $12 million in trading volume, and inflows paled in comparison to the US market's $4.6 billion first day of Bitcoin ETFs. Worse still, just weeks later, these minute gains were rapidly wiped out.
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The UK also faced a similar fate. In May, the London Stock Exchange (LSE) approved the listing of the first-ever cryptocurrency ETPs. ETPs are financial instruments that track the underlying price of an asset, such as a commodity or security.
However, since their launch on 28 May, the products have failed to attract inflows due to institutional demand.
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Indeed, as successful as Bitcoin ETFs were in the US, their success was by no means guaranteed. The same could be said for Ethereum ETFs. Nonetheless, Perera believes Ethereum ETFs have an edge over Bitcoin's ETFs.
"Unlike BTC, which is perceived to be digital gold, ETH supports broader use cases such as DeFi and tokenization, making it attractive as a yield-generating asset. Thus, the spot ETH ETFs will attract a more diverse group of investors," he explained.
"As more funds flow into these ETFs, increased demand for ETH is likely to drive prices up even further. We believe that the ratio of funds inside the BTC and ETH ETFs will reflect the underlying market cap ratio of the physical assets."
Price War
At the time of writing, Ethereum ETFs are set to launch in a matter of hours. But ahead of the highly anticipated launch, Grayscale has already landed themselves in controversy.
In a recent filing, Grayscale revealed that it plans to leave fees for its ETH ETF at 2.5% after converting its $10 billion Grayscale Ethereum Trust (ETHE). The figure is at least 10 times higher than those revealed by competitors.
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A 0.25% fee will be charged, with an initial fee of 0.12% for the first 12 months or until the fund reaches $2 billion.
BlackRock and Fidelity are only charging a 0.25% sponsor fee on funds. BlackRock will impose a fee of 0.12% for the first $2.5 billion or 12 months while Fidelity will waive the entire sponsor fee until year-end.
Meanwhile, Bitwise and 21Shares will charge a fee of 0.20% and 0.21% respectively, both of which will be waived for the first six months or until AUM hits $500 million.
VanEck is also charging a 0.21% fee with a 12-month waiver period or until $1.5 billion in assets is hit. Franklin Templeton is charging a 0.19% fee, waived until the first $10 billion in assets on 31 January 2025. Invesco Galaxy's 0.25% fee will not include a fee waiver, and Pro Shares has not yet disclosed its fee structure.
Grayscale, which holds the lead for having the biggest Bitcoin ETF fund, with AUM of $24.33 billion, has now come under fire from the market for its ETH ETF fees.
BRN Says
BRN analyst Valentin Fournier has also weighed in on the momentous occasion. "While the initial inflows might not provide a clear picture of future trends, the launch is expected to introduce significant market volatility," he said.
"Investor sentiment currently shows caution, as indicated by the lower amount of positions to liquidate ($800M below 69K) and a stabilizing level of open interest after a 26% surge over the past two weeks for both Bitcoin and Ethereum."
"We believe Bitcoin is gaining traction, with strong price movements on the horizon. If expectations for large ETF inflows, imminent rate cuts, and positive declarations from Trump are met, a new all-time high is achievable."
#Bitcoin📷 is currently trading slightly below its upward trend line as investors await the inflows from the upcoming #Ethereum ETF. This reflects a cautious market sentiment, with traders adopting a wait-and-see approach.
— BRN (@thebrn_co) July 23, 2024
Open thread 🧵 (1/5)
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