US Spot Ether ETFs Mark Market Debut in Another Victory for Crypto Industry – Reuters

By Hannah Lang and Suzanne McGee

U.S. exchange-traded funds (ETFs) linked to the price of ether experienced a robust launch on Tuesday, with $1.07 billion worth of shares traded, according to data from a digital asset index provider, a digital asset manager, and various traders.

The most active ETFs included Grayscale’s Trust, which saw over $450 million in trading volume, the iShares Ethereum Trust with approximately $245 million, and the Fidelity Advantage Ether ETF, which recorded $137 million in turnover. Additionally, ETFs from Franklin Templeton, VanEck, Bitwise, 21Shares, and Invesco/Galaxy also began trading on the same day.

The debut of these ether products follows the launch of nine U.S. spot bitcoin ETFs in January, marking another positive development for the cryptocurrency sector’s efforts to integrate digital assets into the mainstream. However, analysts suggest that these new products may not see the same level of inflows as bitcoin ETFs.

Trading volumes on Tuesday were significantly lower than the $4.6 billion that was recorded during the bitcoin ETFs’ launch in January. Data regarding ether ETF inflows will be available starting Wednesday morning.

“While ether ETFs may not achieve the same inflow levels as bitcoin ETFs, they signify an important advancement in the growth of the cryptocurrency market,” stated Grzegorz Drozdz, a market analyst at an investment firm.

The price of ether, the second-largest cryptocurrency after bitcoin, fell during the day, which negatively impacted the prices of the newly launched ETFs. By market close, ether was trading flat at approximately $3,486.75.

Industry participants view the introduction of these ETFs as a critical step in the ongoing effort to classify ether as a commodity instead of a security. Although the Securities and Exchange Commission (SEC) has not definitively classified ether as a commodity, the new products are defined in their filing documents as commodity-based trusts.

The launch bolsters the perception of legitimacy within the cryptocurrency market, according to Cristiano Ventricelli, a senior analyst of digital assets at a ratings agency. He emphasized that crypto ETFs could enhance market stability and diminish price volatility.

The approval of bitcoin ETFs was a culmination of a lengthy battle with the SEC, which had previously rejected such products over concerns about market manipulation. The agency was compelled to approve the ETFs following a court case brought by a digital asset manager, although it cautioned that these investments still carry significant risks.

The launch was among the most successful in ETF history, attracting $33.1 billion in net inflows by June.

ETF issuers competed intensely on fees, with many firms offering fee waivers for a limited time. The fees for ether ETFs range from 0.19% for one product to as high as 2.5% for Grayscale’s ether trust, which is in the process of being converted to an ETF. Most other ETFs cluster around 0.25%. Overall, these fees are comparable to those associated with bitcoin products, although fewer waivers are being offered for ether ETFs.

Grayscale also introduced a “mini” version of its ether ETF with a lower fee of 0.15%.

Estimates of demand for ether products vary widely, with one research entity projecting monthly inflows could reach $1 billion.

Analysts have noted that demand for ether ETFs will be crucial in gauging investor interest in digital assets beyond bitcoin. A significant hurdle for some investors is the SEC’s omission of the “staking” mechanism in the ether ETFs. This mechanism is an essential feature of the ethereum blockchain that allows users to lock their tokens for yield. The current regulations only permit the ETFs to hold regular, unstaked ether.

The filing process for ether ETFs began in September, with initial concerns among executives regarding SEC approval. However, the agency surprised many by approving the first necessary rule changes in May.

SEC Chair Gary Gensler recently mentioned that the ruling in favor of Grayscale had influenced his decision-making regarding the approval of ether products, given the similarities in underlying market conditions.