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Ether Drops Further After ETF Launch
Key points
- Spot ether ETFs began trading in the U.S. today, with the funds initially having more than $10 billion in collective assets under management.
- Analysts expect the launch of spot ether ETFs to have a net negative impact on the underlying price of ether in the near term, due to expected outflows from the pre-existing Grayscale Ethereum Trust.
- Spot Bitcoin ETFs continue to see strong inflows, with BlackRock’s IBIT alone seeing more than $500 million in inflows on Monday.
- Franklin Templeton, a spot ETF issuer on bitcoin and ether, has invested in a project that intends to bring Ethereum technology to Bitcoin.
Nine-point ether exchange-traded funds (ETFs)) started trading on the stock market on Tuesday, but all the optimism ahead of their approval did not translate into gains for the cryptocurrency markets.
Ether (ETH), the native cryptocurrency of the Ethereum blockchain, dropped less than 1% around the $3,400 level as of 1:30 PM ET, while Bitcoin (BTC) fell more than 2% to around $66,000.
Ether ETFs’ Debut Isn’t as Flashy as Bitcoin ETFs’
Spot ether ETFs began trading at just over $10 billion assets under management (AUM)), according to Bloomberg Intelligence analyst James Seyffart, most of that money is in the current Grayscale Ethereum Trust (ETHE) which has now been converted into an ETF.
“In the long term, Grayscale will simultaneously have the highest and lowest fees in the market. The asset manager’s decision to keep its ETHE fee at 2.5% could lead to outflows from the fund,” Kaiko Research said in a note on Monday.
Outflows from ETHE, if they occur, would be similar to those faced by Grayscale’s Bitcoin Trust (GBTC) after spot bitcoin ETFs began trading in January of this year, most likely due to high fees for the two original funds. Grayscale’s existing fund charges 2.5% fees, while a new “mini” ether ETF will charge 0.15% and commissions for other ETFs are set at 0.25% or less.
Such outflows could impact the price of ether and market sentiment.
“There could be a pullback shortly after the launch of Ethereum spot ETFs, i.e. outflows from Grayscale Ether Trust could dampen market sentiment in the short term,” Jupiter Zheng, a partner at Hashkey Capital’s liquid fund, told The Block.
But Grayscale remains optimistic.
“Compared to the splashy debut of spot bitcoin ETPs in January, the launch of ethereum ETPs has been relatively muted,” said Zach Pandl, Grayscale’s head of research, adding that investors may be “undervaluing” ether ETFs that are “coming to the U.S. market in tandem with a shift in U.S. cryptocurrency policy and the adoption of tokenization by major financial institutions.”
Bitcoin ETF Inflows Continue to Rise
As for bitcoin, there is clearly no lack of demand for spot ETFs, such as BlackRock’s iShares Bitcoin Trust (IBITS) recorded its sixth-largest day of inflows in its short history on Monday, at $526.7 million, according to data from Farside Investors. Daily inflows for the overall spot bitcoin ETF market also hit their highest level since June 5.
In particular, asset manager Franklin Templeton, which has issued both bitcoin and ether ETFs, appears to have decided to cover its back when it comes to Ethereum by investing in Bitlayer, a way to implement Ethereum technology on a second-layer Bitcoin network, according to CoinDesk.