Yesterday’s launch of futures-based Ethereum (ETH) exchange-traded funds (ETFs) delivered underwhelming results, with shallow trading volumes indicating a deficient demand for ETH exposure.

Furthermore, a recent report by The Wall Street Journal report by The Wall Street Journal, it was revealed that the launch of the first Ethereum exchange-traded funds on Monday generated little interest from small investors. 

These ETFs provided individual investors access to the second-largest cryptocurrency through brokerage accounts. However, per the report, most of the futures-based Ether ETFs ended the day in the red, with a combined trading volume of less than $2 million.

Red Flags For Ethereum ETFs?

The Ether ETFs, offered by prominent asset management firms such as ProShares, VanEck, and Bitwise Asset Management, are entering a highly competitive market. Experts believe these funds will have to compete fiercely in cost and marketing strategies to attract investors amidst the crowded landscape.

Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, expressed his concerns regarding the funds, stating: 

A lot of these funds are going to struggle to get assets. There’s probably only room for one stud in this race.

During a Bloomberg TV appearance, Balchunas emphasized the relatively low trading volume of the Ethereum ETFs compared to BITO, a Bitcoin (BTC) ETF that tracks the price of BTC using Bitcoin Futures launched in 2021. 

Notably, the trading environment for the first futures-based Ether ETFs differs significantly from the first futures-based Bitcoin ETFs. ProShares’ initial Bitcoin ETF (BITO) debut, which took place during the peak of the crypto bull market, was one of the most highly traded ETF launches ever. 

Conversely, on the inaugural trading day of Ether future ETFs, the value traded amounted to nearly $1.9 million by noon, with Valkyrie emerging as the frontrunner in the race for Ether futures ETFs. Initially focused on Bitcoin futures and later expanded to include Ether, the fund experienced a 3.9% increase.

VanEck’s EFUT managed to generate some volume by launching ahead of its competitors. However, volumes quickly dwindled, with a staggering 49% of EFUT’s daily volume occurring within its first trading minute. 

Disappointing Launch Day For Futures-Based ETH

Senior analyst of k33 research, Vetle Lunde, suggests that this lackluster launch points to more choppy market conditions ahead. The highly anticipated launch day failed to meet market expectations, reminiscent of the underwhelming debut of Bakkt. 

This sheds light on a seemingly “non-existent” demand for additional crypto exposure, indicating a continuation of the current consolidation range in the market.

In defense of the lackluster ETF launch, it is worth noting that activity in crypto ETFs has been consistently shallow in recent months. BITO, for example, has witnessed consistent outflows since mid-July and experienced its third-lowest average daily volume (ADV) in September 2023, surpassed only by volumes in August and December 2022.

The Ethereum futures products launched on Monday, along with their respective net expense ratios, include:

BitWise Ethereum Strategy ETF (AETH) – 0.85%
Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP) – 0.85%
ProShares Ether Strategy ETF (EETH) – 0.95%
ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE) – 0.95%
Bitcoin & Ether Market Cap Weight Strategy ETF (BETH) – 0.95%
VanEck Ethereum Strategy ETF (EFUT) – 0.66%.

The disappointing debut of futures-based ETH ETFs underscores the challenges in generating substantial investor interest in crypto ETFs. As the crypto market continues to evolve, market participants will closely monitor developments and assess the impact on investor sentiment and the future of crypto ETFs.

Featured image from Shutterstock, chart from TradingView.com 

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Filed under: Bitcoin - @ October 3, 2023 8:00 pm