In a significant move for the cryptocurrency market, BlackRock, Bitwise Investments, and Fidelity have emerged as the early leaders among US exchange-traded funds (ETFs) that invest directly in ether, the native token of the Ethereum blockchain. These funds amassed substantial investments on their first day of trading, marking a notable entry into the traditional finance space.
On their debut trading day, BlackRock’s ETF drew in about $267 million, Bitwise Investments secured $204 million, and Fidelity gathered $71 million. These figures are based on data from Bloomberg Intelligence. However, this launch coincided with investors withdrawing approximately $484 million from Grayscale Investments, a more established but pricier competitor.
The collective inflow into the nine new ETFs focused on ether was about $108 million, generating an overall trading volume of $1.1 billion. This launch follows the SEC’s final approval earlier in the week, bolstering the crypto market’s presence in traditional finance after the launch of the first spot bitcoin ETFs in January.
Despite the strong debut, ether ETFs’ inflows are significantly smaller than the bitcoin ETFs, which pulled in approximately $655 million with nearly $4.7 billion in trading volume on their first day. Market participants suggest that Ethereum, although a major cryptocurrency, does not match Bitcoin’s recognition or investment narrative.
Bitcoin boasts a market cap of $1.3 trillion, dwarfing Ethereum’s $412 billion. Ethereum serves as a platform for building new cryptocurrency projects, and its native token, ether, can earn returns by securing and validating transactions on the Ethereum network.
However, regulatory uncertainties still cloud this activity, as the SEC has not clarified whether staking qualifies as a security. As a result, the SEC prohibits the new ETF issuers from engaging in staking.
Grayscale, which converted its Ethereum Trust into an ETF, continues to charge a 2.5% management fee, significantly higher than its competitors. It also introduced a less expensive “mini” ether ETF, which attracted about $15 million, according to Bloomberg data.
The ether ETF launches followed an unexpected initial approval by the SEC in May. Grayscale’s head of research, Zach Pandl, suggested that the market might be underestimating the long-term significance of this milestone for the crypto industry.
Analysts and research groups have conservatively projected that ether ETFs will collectively amass over $3.5 billion in the next six months, with some estimates ranging from $1 billion to $7.5 billion. In contrast, bitcoin ETFs have attracted more than $17 billion in new money since their January debut, led by BlackRock’s iShares Bitcoin Trust, which now manages around $22 billion in assets.
Since the start of 2024, bitcoin and ether prices have risen significantly, by about 50% and 45%, respectively. This performance underscores the growing interest and investment in the cryptocurrency market, even as regulatory and market dynamics continue to evolve.
The launch of ether ETFs by leading financial institutions like BlackRock, Bitwise Investments, and Fidelity marks a critical step in integrating cryptocurrency into traditional finance. While challenges remain, particularly around regulatory clarity and market acceptance, the initial success of these funds indicates strong investor interest and a promising future for crypto-based financial products.
