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BlackRock, Bitwise Investments and Fidelity have emerged as the early leaders among the US exchange traded funds that invest directly in ether, the world’s second largest cryptocurrency.
The funds took in about $267mn, $204mn and $71mn respectively on their first day of trading Tuesday, while investors withdrew about $484mn from a better established but more expensive rival Grayscale Investments, according to data from Bloomberg Intelligence.
The nine new ETFs that invest in the native token of the ethereum blockchain drew in about $108mn, generating about $1.1bn in overall volume.
The stock market funds were given final sign-off by the Securities and Exchange Commission earlier this week and give the crypto market a firmer toehold in traditional finance following January’s launch of the first spot bitcoin ETFs.
But the inflows for ether ETFs are far smaller than the volume and flows for the bitcoin ETFs, which pulled in more about $655mn with nearly $4.7bn in overall trading volume, in the first day.
Traders and executives said it was unlikely that ethereum would match bitcoin’s spectacular performance, because it was not as well known and had a different function and investment narrative to bitcoin.
Bitcoin’s market cap of $1.3tn is much higher than ether’s $412bn while ethereum is widely used as a platform for building new cryptocurrency projects.
Ethereum’s native token, ether, can also be used to earn a return for the holder when it is staked, or locked up, to help secure and validate transactions on the Ethereum network.
However the regulator had yet to clarify if the activity qualified as a security and barred the new ETF issuers from participating in staking.
“Given the larger-than-expected outflows from the Grayscale Ethereum Trust, these inflows align with the consensus expectation of around 20 per cent of the spot Bitcoin ETFs’ assets under management,” said CCData, a data provider, on Wednesday.
Grayscale, which converted its Ethereum Trust to an ETF, has maintained its 2.5 per cent management fee, which is far in excess of its rivals’ charges. It also spun off a less expensive “mini” ether ETF, which pulled in about $15mn, per Bloomberg data.
The ether ETF launches followed an abrupt initial approval in May by the SEC. Grayscale’s head of research, Zach Pandl, suggested that investors “may be underappreciating the importance of this milestone for the current market cycle and for the crypto industry over the longer-term.”
Projections compiled by CCData indicate that analysts and research groups are conservatively expecting the ether ETFs to amass just north of $3.5bn collectively over the next six months, with predictions ranging from $7.5bn to $1bn.
The bitcoin ETFs have amassed more than $17bn combined in new money since their January debut, led by BlackRock’s iShares Bitcoin Trust, which now has assets of about $22bn.
The prices of bitcoin and ether have risen by about 50 per cent and 45 per cent, respectively, since the start of 2024.
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