Spot Ethereum ETFs Kick Off First Day of Trading
The funds based on the second largest cryptocurrency dipped following their SEC approval Monday evening.
Spot Ethereum ETFs dipped in their debut today, less than 24 hours after the SEC capped an eight-month process by approving the funds–the second grouping of ETFs based on the ongoing price of a major cryptocurrency to list on U.S. exchanges.
Funds issued by BlackRock, Fidelity, 21Shares, VanEck, Franklin Templeton and Invesco jointly with Galaxy were among those to receive the regulator's greenlight on Monday. Grayscale is planning to start trading two spot Ethereum ETFs on Tuesday, a person familiar with its application said. ProShares submitted its application after the others, so was not expected to hear from the SEC at this juncture.
The Ethereum funds will track the price of ether, the token of the Ethereum smart contracts blockchain and second largest digital asset behind bitcoin with a $420 billion market capitalization. Ether was hovering around $3,500, down slightly from the weekend but still up about 45% year-to-date.
"Our clients are increasingly interested in gaining exposure to digital assets through exchange-traded products (ETPs), which provide convenient access, liquiidity and transparency," said Jay Jacobs, U.S. head of thematic and active ETFs for BlackRock. "Ethereum's appeal lies in its decentralized nature and its potential to drive digital transformation in finance and other industries.
The ETFs' debut follows less than eight months after the SEC approved funds based on the spot price of bitcoin, the world's largest crypto with a $1.1 trillion market value. Those ETFs have generated more than $17 billion in inflows and now manage roughly $55 billion in assets with the BlackRock Bitcoin Trust (IBIT) now nearing $20 billion of those AUM.
The bitcoin funds' wild success has reflected investors' fast-growing appetite for crypto-focused investments.
But many analysts are predicting lesser immediate interest in the new Ethereum products largely because the protocol is not as recognizable or well-understood as bitcoin. Ethereum an open-source blockchain platform that enables the development of decentralized applications and smart contracts that its proponents believe will transform financial services and many other industries.
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Uncertain Demand for Ethereum ETFs
"The only way to buy something is to understand why," said Matthew Kaye, head of operations and strategy at Intuition Systems, an Ethereum-based data attestation protocol, in an interview with etf.com. "It's not digital silver. It's the home of decentralized innovation."
Kaye noted optimistically that "the ether ETFs will start with a whisper but they'll get there."
In a note Monday, crypto-focused research group Kaiko wrote that "other than potential outflows from Grayscale Ethereum Trust (ETHE), a conversion from an ETF that carries a 2.5% expense ratio, "the outlook for spot ETH ETFs is less clear."
"The launch of...futures-based ETH ETFs in the US late last year was met with underwhelming demand, all eyes are on the spot ETFs' launch with high hopes on quick asset accumulation. A full demand picture may not emerge for several months."
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