It was really only a matter of time.
Just seven months after the first spot Bitcoin ETFs hit the market, the Securities and Exchange Commission (SEC) approved for trading on Tuesday nine ETFs that track the Ether cryptocurrency. But the market wasn’t kind to the new products as they all posted significant loss their first two days of trading.
Each ETF will track the spot price of Ether, the world’s second-largest cryptocurrency, and the driving force behind the Ethereum blockchain. Total volume for the nine new ETFs crossed $1.08 billion the first day of trading, according to Bloomberg Intelligence.
“Bitcoin is regarded as a store of value, and a means to transmit money from one party to another,” said Ric Edelman, the founder of the Digital Assets Council of Financial Professionals. “Ethereum allows you to program the conditions for that transmittal, so that the receiving party doesn’t get your money until they fulfill their obligation – such as sending you the concert tickets you’ve purchased.”
The ability to program the conditions for settlement allows Ethereum to operate like an escrow account – but without human intermediaries, continued Edelman. This makes it faster, safer and cheaper, and can be used by virtually every industry in the world.
Despite the assumption that the price of Ether would jump the day the ETFs launched, the market wasn’t kind to either the token or the ETFs. Yesterday, Ethereum’s native token declined 1%. Today, Ether plunged 4.4%, plummeting below $3,400 to $3,322.33.
The decline might be the cliche buy the rumor sell the news. The anticipated launch appears to have been priced into the market. Short-term investors may have used the day to take profits. Today’s drop might be related to the S&P 500 and the Nasdaq having their worst day since 2022
“This is a positive for the crypto industry in my view — some of it may go against the ethos of decentralized finance that the likes of Bitcoin and Ethereum were founded — but the ETFs don’t change anything themselves about the underlying assets or protocols,” said James Seyffart, research analyst at Bloomberg Intelligence. “What these ETFS do is open up bridges between Ethereum and the traditional financial markets.”
These bridges are from decentralized finance to more people and more capital that are either restricted from buying actual cryptocurrencies or don’t want to deal with the many-layered process. The ETF structure also brings regulatory clarity and acceptance by federal regulators, such the SEC.
“The launch of spot Ether ETFs is yet another step down the path towards greater mainstream adoption of crypto,” said Nate Geraci, president of The ETF Store, a registered investment advisor that only offers ETFs.
The Nine ETFs
In addition to the new ETFs, Grayscale Investments won SEC approval to convert its Grayscale Ethereum Trust (ETHE) to a spot ETF. By virtue of being open since 2017, ETHE became the largest spot Ether ETF with $9.19 billion in assets under management as of July 23. On Tuesday, it shed 0.6% on the most volume of all the Ether ETFs, $463.2 million. Today, it dropped 2.5% to 28.62. It still charges the same high expense ratio as it did as a legacy trust, 2.5%.
The firm also launched a second “low-cost” fund, the Grayscale Ethereum Mini Trust (ETH) with initial seeding consisting of 10% of ETHE’s underlying Ethereum, about $1.02 billion. It started the day as the second largest spot Ethereum ETF. On its first day of trading, it inched down 0.9% to $3.27 on volume of $63.8 million. Today, it plunged 3% to $3.17. For the first sixth months of trading, the expense ratio will be 0%. After the six-month period, or when the fund reaches $2.0 billion in assets, the fee will be 0.15%.
Blackrock’s iShares Ethereum Trust (ETHA) posted the second highest volume on Tuesday, at $249.1 million. It fell 1.3% on its first day of trading and tumbled 2.8% to $25.50 on its second. ETHA will charge an expense ratio of 0.25%, with a one-year waiver reducing the fee to 0.12% on the first $2.5 billion assets under management.
Fidelity Ethereum Fund (FETH) declined 1.1% on volume of $137.3 million its first day of trading. Today, it sank 2.9% to $33.67. FETH will waive the expense ratio for the rest of the year, then charge 0.25%.
Bitwise Ethereum ETF (ETHW) dropped 1.3% on volume of $94.3 million yesterday. Wednesday it sank another 2.8% to $24.15. ETHW has a management fee of 0.20%, with the fee set to 0% for the first six months on the first $500 million in assets.
VanEck Ethereum ETF (ETHV) gave back 1.8% on volume of $44.8 million yesterday. Today also sank 2.8% to $49.27. The expense ratio will be waived until July 22, 2025, for the first $1.5 billion of the Trust’s assets. After that the fee will be 0.20%.
Franklin Ethereum ETF (EZET) slipped 1.1% on volume of $15.9 million yesterday. Today it skidded 2.9% to $25.58. The sponsor will waive the expense ratio until January 31, 2025, for the first $10.0 billion in fund assets. After that it reverts to 0.19%.
Invesco Galaxy Ethereum ETF (QETH) moved 1.5% lower on volume of $12.5 million yesterday. Today it dropped 2.9% to $33.64. The expense ratio for this fund is 0.25%, there is no waiver.
And with the least amount of volume at $8.6 million yesterday, 21Shares Core Ethereum ETF (CETH) tumbled 2.5% to $17.29. Today it dove 2.8% to $16.80. The fund will waive the entire management fee until Jan. 23, 2025, or until assets reach $500 million, whichever occurs first. Then it reverts to 0.21%.
All prices from Yahoo! Finance. All volume numbers from Bloomberg Intelligence
Geraci from the ETF store says investors need to focus on five key factors when selecting among the nine ETFs: expense ratio, liquidity (trading spreads & premiums/discounts), assets under management, performance, and the ability of an ETF issuer to provide crypto education. Given that these ETFs all hold the exact same asset in Ether, small differences in items such as fees and performance could tip the scales in favor of one ETF over the others.”
“I think it’s important to underscore the ETH ETF launch as an inflection point,” said Federico Brokate, 21Shares’s head of the U.S. business. “It represents further comfortability with the asset class from the SEC and serves as further proof of crypto’s broader momentum and adoption.”
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