Ethereum ETFs have attracted a lot of investor interest so far, generating $951 million in cumulative trading volume on their second day in U.S. markets. Leading the charge is Grayscale Ethereum Trust (ETHE), followed by BlackRock's iShare Ethereum Trust (ETHA) and Fidelity Ethereum Fund (FETH). Despite impressive trading volumes, the debut still fell short compared to Bitcoin ETFs. Analysts now predict Ethereum ETFs will draw $1-2 billion in AUM over the next three months. Meanwhile, digital asset manager Hashdex filed for a combined Bitcoin and Ether ETF, while ETH's recent price drop below $3,200 has caused some buying interest.
Ethereum ETFs Attract Investor Interest
On their second day in the U.S. markets, Ethereum ETFs generated about $951 million in cumulative trading volume. This happened after these ETFs hit $1.054 billion in trading volume on Tuesday, their very first day on the market.
Ethereum ETF Flow (Source: Farside Investors)
Leading the pack was the Grayscale Ethereum Trust (ETHE), which accounted for about $492 million or approximately 52% of the total volume. Following closely were BlackRock's iShare Ethereum Trust (ETHA) with $256 million and the Fidelity Ethereum Fund (FETH) with $113 million.
On Tuesday, the ETFs recorded net inflows of $106.7 million and amassed more than $10 billion in assets under management, according to SosoValue data. However, the Grayscale Ethereum Trust experienced $484.1 million in net outflows, making it the only fund to see outflows.
Bloomberg Intelligence’s James Seyffart said it "pretty much" met his expectations for a standard ETF launch, and it was "a smashing success."
Meanwhile, spot Bitcoin ETFs saw $77.97 million in outflows on Tuesday, ending a 12-day inflow streak. Rennick Palley, a founding partner at VC firm Stratos, pointed out some early signs of rotation from spot Bitcoin ETFs into Ethereum ETFs. Bitwise President Teddy Fusaro also picked up on the fact that Ethereum ETFs traded about $852 million in value on Wednesday, while Bitcoin ETFs traded around $1.1 billion. Fusaro is surprised that ETH ETFs were trading about 75% of the notional value of BTC ETFs, which was higher than he expected.
Ethereum ETFs Still Fall Short of Bitcoin’s Debut
Spot Ethereum ETFs launched with a strong start on their first day of trading on July 23. However, they still fell short compared to Bitcoin’s historic ETF debut in January, and analysts believe they may face some challenges in catching up.
The spot Ether ETFs clocked inflows of 10% to 20% of what Bitcoin funds achieved during their initial trading day. This aligns with most people’s expectations considering Bitcoin’s larger market capitalization, but it also raises concerns that Ether might be a tougher sell to traditional investors.
Adrian Fritz, the head of research at 21Shares, stated that Bitcoin's spot ETF set new records as the most successful ETF launch in financial history. He explained that Bitcoin’s narrative as an emerging store of value is simpler and much more understandable, while Ethereum’s value proposition is a bit more complicated and requires more knowledge to fully grasp. Despite this, Fritz is still confident that Ethereum will attract a lot of institutional interest.
Analysts predict that spot ETH ETFs will attract $1 billion to $2 billion in total assets under management (AUM) over the next three months. In comparison, Bitcoin ETFs managed to gather around $12.7 billion in the same period. ETH ETFs expected to gather about 10% to 15% of that amount.
On the bright side, early trading data shows that there is already a lot of institutional interest in ETH ETFs , which was proven by their impressive trading volumes on their first day in the market.
Ethereum volatility (Source: CoinMarketCap)
The strong inflows also helped alleviate the market anxiety surrounding the ETF launch. The Ethereum Volmex Implied Volatility (EVIV) index, which measures the forward-looking 30-day expected volatility of ETH, dropped by 4 points to around 65 in 24 hours of the ETFs' listing. This decline suggests that the market anticipates a stabilizing effect on ETH spot markets because of the ETF flows.
Hashdex Files S-1 For Combined ETF
In other ETF news, digital asset manager Hashdex has taken a big step towards offering a combined spot Bitcoin and Ether ETF in the United States. On July 24, the firm submitted an S-1 registration statement for its Hashdex Nasdaq Crypto Index US ETF.
This ETF will track cryptocurrency assets in the Nasdaq Crypto US Settlement Price Index, which measures the performance of a large portion of the digital asset market. Initially, the fund plans to include only Bitcoin and Ether, but the filing indicates that more assets could be added in the future.
According to Hashdex's filing, if any other crypto asset becomes eligible for inclusion in the Index, the firm will transition to a sample replication strategy, maintaining Bitcoin and Ether in proportions determined by the Index. In these cases, Hashdex will need to file another 19b-4 form for approval to amend the cryptocurrencies held in the ETF.
The S-1 filing was submitted about five weeks after Hashdex filed its 19b-4 form on June 18. The U.S. securities regulator acknowledged this form in late June. If both filings are approved, the combined cryptocurrency ETF will be officially allowed to list and trade. It will also become the first of its kind in the United States. The ETF would be weighted according to the relative free float market caps of listed coins, which is currently estimated at 76.3% Bitcoin and 23.7% Ether.
Hashdex may consider adding other cryptos like Litecoin (LTC), Chainlink (LINK), Uniswap (UNI), and Filecoin (FIL), which are listed in the Nasdaq Crypto US Settlement Price Index. However, the proposal does not include Ether staking in the combined spot cryptocurrency ETF.
BitGo and Coinbase Custody will act as custodians for Hashdex’s Bitcoin and ETH assets, and will place them in segregated accounts for individual shareholders.
ETH Price Drop Sparks Buying Interest
Meanwhile, traders have identified ETH’s price drop to below $3,200 as a buying opportunity, but this window may close once the impact of ETFs is fully realized. Pseudonymous crypto trader Sheldon The Sniper recently pointed out two major buying zones, around $3,300 and below, and mentioned that the $3,097 zone has already passed. Sheldon predicts that ETH could reach $4,000 in the next week or two, which means that these entry points are key opportunities for potential gains.
ETH is currently trading hands at $3,174 after its price dropped by more than 7% over the past 24 hours. This decline took Ether below the $3,500 mark, a level it has hovered around since the debut of spot Ether ETF trading.
Despite expectations of a larger price drop post-ETF debut, the 7+% fall liquidated $42.53 million in short positions and $2 million in long positions, according to CoinGlass data.
Analysts predict some very large gains for ETH, with some anticipating "tremendous" price action driven by ETF inflows, similar to Bitcoin’s surge from $40,000 to $70,000 after its ETF launch. Michael van de Pope suggests that ETH could potentially double its price in the near term, from $3,500 to $7,000-7,500 after some short-term volatility.
Swyftx lead market analyst Pav Hundal also expects ETH to aim for its November 2021 all-time high of $4,890 as a nearer-term goal.
