(Bloomberg) -- U.S. exchange-traded funds investing directly in Ether achieved overall net inflows of US$107 million on their first day of trading in launches that will provide a window onto mainstream crypto demand outside of Bitcoin.
BlackRock Inc.’s iShares Ethereum Trust posted the highest level of subscriptions on Tuesday, $267 million, followed by Bitwise Ethereum on $204 million and the Fidelity Ethereum Fund with $71 million, according to data compiled by Bloomberg.
Over $1 billion worth of shares traded across the nine ETFs, whose launch comes six months after U.S. regulators permitted inaugural U.S. spot-Bitcoin ETFs. The latter have attracted a net inflow of over $17 billion this year.
Ether is the No. 2 digital asset and popular for blockchain-based financial services but the token’s market value is still less than a third of Bitcoin’s, spurring expectations of smaller inflows compared with Bitcoin ETFs.
Investment narrative
The Bitcoin funds benefited from a controversial narrative that pitches the top token as digital gold, a spin that Ether lacks. The Ether funds also won’t offer so-called staking rewards for blockchain maintenance, a return that can be harnessed by owning the token directly.
“The flows are in line with our expectation,” said Vivien Wong, a partner at crypto investor HashKey Capital. She expects $3 billion to $5 billion of net inflows for the Ether portfolios over the next six months.
Eight new Ether funds listed on Tuesday while the more than six-year-old Grayscale Ethereum Trust — the largest for Ether with assets of $8.6 billion — converted from a closed-end structure into an ETF. The conversion smooths exits for arbitragers and the product saw a net outflow of $484 million.
There’s a risk such outflows could counteract the positive impact of new subscriptions, potentially exerting “downward” market pressure, Wong said.
Trailing Bitcoin
Ether underperformed Bitcoin on Wednesday, dropping one per cent as of 1:56 p.m. in Singapore compared with steady performance by the original cryptocurrency. Ether’s 85 per cent climb during a digital-asset rebound over the past year trails a 125 per cent jump in Bitcoin, which scaled a record high in March.
The U.S. Ether ETFs posted “a very solid first day of trading,” said Bloomberg Intelligence ETF Analyst Rebecca Sin. She added that “the Ether market is much smaller than the Bitcoin market, so education is critical as we are only at the beginning of a long journey.”
The U.S. Securities and Exchange Commission in May surprisingly pivoted toward approval of spot-Ether ETFs after grudgingly allowing Bitcoin funds in the wake of a court reversal in 2023.
The agency cracked down on the digital-asset industry following the collapse of the FTX exchange but pro-crypto Donald Trump’s push to return to the White House had sparked speculation of a friendlier climate ahead.
With assistance from Emily Graffeo
©2024 Bloomberg L.P.
