ETF Spotlight: Grayscale ETHE Outflows Mark Debut
The fund based on the price of ether has shed assets in its opening days, while other such funds have generated inflows.
The Grayscale Ethereum Trust (ETHE) has shed over $1.1 billion in assets during its first three days of trading, more than the combined inflows for the other eight spot Ethereum funds that debuted Tuesday, data from U.K. asset manager Farside Investors shows.
ETHE outflows hit nearly a half-billion alone on its inaugural day, aligning with analyst predictions that the fund's seed AUM of $9.1 billion would shrink at least partly because of its 2.5% fee, the highest of the Ethereum ETFs. The fund differs from the other Ethereum funds in that it is a conversion from an existing fund that was first offered as a private placement in 2017 and started trading publicly on OTC markets in 2019.
A separate Ethereum fund unveiled Tuesday, the Grayscale Ethereum Mini Trust (ETH), which is based on ETHE, has generated $119 million in inflows.
In a Telegram message to etf.com regarding ETHE, Strahinja Savic, head of data and analytics at Toronto-based crypto firm FRNT Financial, also noted that ETHE has been trading at a discount to its net asset value (NAV).
"Now that it is trading as an ETF, investors have an opportunity to exit the product on par with NAV," Savic wrote.
Read More: SEC Changes Ethereum Rule, Sets Stage for ETF Approval
Grayscale Head of Research Zach Pandl said in an email on Tuesday that compared to "the splashy debut of Bitcoin ETPs, the launch of Ethereum ETPs has been...low key."
"The Grayscale Research team believes investors may be under-appreciating the importance of this milestone for the current market cycle and the crypto industry over the longer term," Pandl wrote. "Grayscale Research expects spot Ethereum ETPs will see significant net inflows over the coming months."
etf.com reached out to Grayscale for further comment.
How ETHE, Spot Ethereum ETFs Work
ETHE tracks the ongoing price of ether, the token of the Ethereum smart contracts blockchain that admirers of the protocol believe may transform the financial services industry and other sectors by eliminating the need for centralized organizations to record data and verify transactions.
Read More: Spot Ethereum ETF Fee Fight Shapes Up
Ethereum is the second largest cryptocurrency with a roughly $420 billion market capitalization, trailing bitcoin's approximately $1.1 trillion market value.
In early Friday trading, ether was changing hands at about $3,270, up about 3%, although it was down more than 4% over the past week amid a wider downturn in digital asset markets and the technology sector, according to crypto data provider CoinMarketCap.
Spot Ethereum ETF Inflows
Excepting ETHE, spot Ethereum ETFs have generated approximately $978 million in inflows, led by the $354.8 million that investors have plowed in the BlackRock Ethereum Trust (ETHA). BlackRock's spot bitcoin ETF has generated about $19.5 billion in inflows, the most among the 11 such funds to begin trading this year.
FRNT's Savic called the ETHE outflows unsurprising. "It's the inflows into the remaining ETFs that are exceeding the expectations of many commentators," he wrote.
Read More: Spot Ethereum ETFs Approved to Start Trading Tomorrow
