When a new wave of ether exchange-traded funds (ETFs) were launched in the U.S. about a month ago, many thought the launch was a flop, especially after headlines reported that investors had pulled out $465 million from these funds. However, a closer look at the numbers tells a different story, and the reality is more optimistic than it seems.
It is important to take into account that the majority of the outflows came from one product: the Grayscale Ethereum Trust (ETHE). This trust was launched in 2017, offering investors a way to invest in Ethereum without buying the cryptocurrency directly, and in July of this year, Grayscale turned the trust into an ETF to keep up with the growing demand for easier ways to invest in digital assets. Nonetheless, the Grayscale ETF charges higher fees compared to the new ether ETFs from companies like BlackRock, Fidelity, and Bitwise, and as a result of this, many investors moved their money from Grayscale to these newer and much cheaper ETFs.
If we exclude these outflows from Grayscale, the picture looks much better. In fact, over $2 billion has flowed into the new ether ETFs within just five weeks. Therefore, despite what the initial numbers suggest, investors are actually very interested in ether.
Among the new ether ETFs, BlackRock’s iShares Ethereum Trust (ETHA) stands out, having already attracted over $1 billion in net inflows – this is probably due to the company’s strong reputation. Meanwhile, Fidelity’s Ethereum Fund and the Bitwise Ethereum ETF have also seen substantial inflows, with $390 million and $312 million, respectively.
Many may think that these numbers are not as relevant if we compare them to the inflows we witnessed for Bitcoin ETFs when they were first launched, however, it is important to keep in mind that there are factors that could be contributing to this difference. Although Ethereum is the second largest crypto by market value, it is still not as well understood as Bitcoin. Something clear about both cryptos is that they serve different purposes, and this means that the types of investors interested in ether ETFs might not be the same as those drawn to Bitcoin ETFs. Bitcoin is often seen as “digital gold,” a store of value, while Ethereum, on the other hand, is more like a technology platform that supports a wide range of applications.
Ethereum has the ability to support decentralized applications (dApps) such as decentralized finance (DeFi) platforms, non-fungible tokens (NFTs), and smart contracts, and these applications could disrupt traditional industries, which in turn makes Ethereum an attractive investment for those who believe in the technology’s long-term potential.
In regards to the responses from experts on the inflows that ether ETFs have experienced so far, firms like the ETF Store have acknowledged the strong interest in these new ether ETFs. There is a belief that there is a solid demand for these financial products, and many experts anticipate that as more investors become familiar with the potential of Ethereum, the demand for ether ETFs will continue to grow.
In conclusion, while the initial performance of ether ETFs may not have been perceived as strong by some, the substantial investment of over $2 billion in these funds indicates a promising trajectory; and it is only a matter of time before more investors, particularly those seeking stable exposure to a technology-focused digital asset, begin to invest in ether ETFs.
