The launch of new Ethereum exchange-traded funds (ETFs) has encountered significant difficulties, with nearly $750 million exiting the ETFs within four of the first five trading days. This contrasts sharply with the more positive reception of Bitcoin ETFs, highlighting differing investor sentiment and potential regulatory challenges.
Initial Outflows and Recent Uptick
Despite initial outflows, there was a notable shift on July 30 when net inflows across all nine spot Ether ETFs reached $33.6 million, marking the first positive daily flow since their launch. This indicates a slight recovery but still underscores the initial skepticism and caution among investors.
Bitwise vs. BlackRock: A Battle for Market Share
On July 30, Bitwise briefly surpassed BlackRock in trading volume by waiving its 0.2% fee for the first six months, a move aimed at attracting more inflows. However, by July 31, BlackRock had regained its position, holding 5.59% of the total assets under management (AUM) among the Ethereum ETFs, according to Nansen data.
Regulatory Concerns and Market Sentiment
The United States Securities and Exchange Commission (SEC) has expressed concerns about the staking elements of Ethereum’s proof-of-stake (PoS) consensus mechanism. This regulatory uncertainty may contribute to the tepid response to Ether ETFs, as investors navigate the complexities of Ethereum as an investment. Consensys addressed these concerns on March 31, asserting that Ethereum’s PoS mechanism offers security comparable to Bitcoin’s proof-of-work (PoW), which has SEC approval.
Also Read: Direct Client Demand Drives Growth in BlackRock’s Bitcoin ETF
BlackRock’s View on Crypto ETFs
BlackRock’s head of digital assets, Robert Mitchnick, highlighted at the Bitcoin 2024 conference that the firm’s clients show significant interest in Bitcoin ETFs and some interest in Ethereum ETFs. However, beyond these two assets, client interest diminishes sharply, suggesting a narrow focus within the crypto investment space.
Bitwise’s chief investment officer, Matt Hougan, expressed confidence in the potential impact of Ether ETFs on the market. He predicted that while the initial weeks might be volatile, the conversion of Grayscale Ethereum Trust (ETHE) to an ETP could lead to new highs by the end of 2024. Hougan’s optimism is based on Ethereum’s widespread use, the forced sell-offs by Bitcoin miners, and the substantial portion of ETH (28%) locked away through staking.
