Ether ETFs Have Bled Money, but That’s Not the Whole Story

The
headline
could
easily
be
this:
Recently
launched
ether
exchange-traded
funds
have
been
a
dud.

After
all,
investors
have
removed
$465
million
of
assets
in
total
from
the
nine
funds
that
began
trading
in
the
U.S.
a
month
ago.

Dig
a
little
deeper
and
you’ll
find
success,
however.

BlackRock’s
iShares
Ethereum
Trust
(ETHA)
just
passed
$1
billion
of
net
inflows,
making
it
the
seventh-most-successful
ETF
launch
this
year,
according
to
Nate
Geraci,
president
of
the
ETF
Store.
Fidelity’s
Advantage
Ether
ETF
and
the
Bitwise
Ethereum
ETF
have
taken
in
$390
million
and
$312
million,
respectively,
according
to

data
from
Farside
Investors.

But
back
to
the
overall
removal
of
money,
which
stems
from
the
billions
of
dollars
yanked
from
the
fact
that
Grayscale
Ethereum
Trust
(ETHE).
That
product
was
first
sold
to
investors
in
2017
and
began
trading
publicly
in
2019
–
albeit
in
a
less-appealing
trust
format.
It
was
turned
into
an
ETF
in
July
as
new
funds
from
the
likes
of
BlackRock
sprung
into
existence.

The
Grayscale
product
features
a
much
higher
fee
for
investors,
meaning
many
might
want
to
shift
to
cheaper
fund.
Exclude
the
massive
Grayscale
outflows
and
investors
have
allocated
over
$2
billion
to
the
other
funds
in
the
first
five
weeks.

“The
fact
that
over
$2
billion
has
been
purposefully
allocated
to
the
other
spot
ether
ETFs
is
a
good
sign
as
it
shows
that
investors
want
ether
exposure,”
Geraci
said.
“While
not
the
dazzling
debut
we
saw
from
spot
bitcoin
ETFs,
I
think
spot
ether
ETFs
have
clearly
had
a
successful
first
month
and
I
expect
this
to
continue.”

In
regards
to
Grayscale,
Geraci
believes
that
the
outflows
muddy
the
waters
and
make
it
difficult
to
get
a
clear
picture
of
how
much
demand
there
is
for
the
funds.
“We
simply
don’t
know
all
of
the
underlying
motivations
of
ETHE
sellers,
which
is
why
I
think
it’s
important
to
look
beyond
that
product.”

Demand
is
likely
to
continue
and
grow
over
the
next
few
months,
said
Sui
Chung,
CEO
of
index
provider
CF
Benchmarks.
He
predicts
that
more
wealth
managers
will
offer
the
products
to
their
clients.

“We
anticipate
flows
into
ETH
ETFs
will
continue
to
climb
once
wealth
managers
and
financial
advisors
complete
the
education
process
for
what
ETH
is,
its
utility
and
why
they
should
hold
it
alongside
their
BTC
ETF,”
he
said.
“The
educational
process
will
expose
investors
to
the
Ethereum
economy
and
highlight
its
key
differences
to
Bitcoin,
making
it
abundantly
clear
that
the
allocation
drivers
are
different
and
both
belong
in
a
balanced
investment
portfolio.”

Spot
bitcoin
ETFs,
which
began
trading
in
January,
have
seen
nearly
$18
billion
in
inflows.
Investors
have
allocated
roughly
$20
billion
into
BlackRock’s
product,
which
is
mostly
offset
by
$17
billion
worth
of
outflows
out
of
the
Grayscale
Bitcoin
Trust
(GBTC),
another
Grayscale
fund
that
existed
for
years
as
a
trust
before
converting
to
an
ETF
this
year.