The arrival of spot Ethereum ETFs in the United States on July 23 has sent shockwaves through the crypto market. One of the major players, Grayscale, saw its newly converted Ethereum Trust (ETHE) experience a staggering loss of $484 million on the first day of trading. This indicates a potentially rocky road ahead for the world’s largest crypto asset manager.
Similar to the fate of Grayscale’s Bitcoin Trust when it transitioned to a spot ETF, ETHE could see a significant decrease in assets under management. If history repeats itself, the fund may lose up to half of its total assets, amounting to a substantial $4.5 billion worth of Ethereum. Investors seem to be pulling out of the fund in order to capitalize on the large premium gap that existed before the transition to a spot-based ETF. Furthermore, the high 2.5% fee associated with ETHE is driving investors towards competing funds with more favorable fees.
In response to the challenges faced by ETHE, Grayscale has introduced an Ethereum Mini Trust (ETH) with a lower 0.15% fee and a $1 billion AUM starter. This move seems to have attracted some investor interest, as the fund received an inflow of $15 million on its debut trading day, according to preliminary data from Farside Investors. Despite the struggles of ETHE, the broader ETF scene saw a combined inflow of $106 million, signaling a relatively positive market sentiment.
The launch of spot Ethereum ETFs did not trigger a significant price pump in the Ethereum markets, contrary to some expectations. While Ethereum briefly hit an intraday high of $3,534 before retracing to around $3,400, it managed to stabilize at $3,430 during the Wednesday morning Asian trading session. Analysts foresee a possible retreat in ETH prices below $3,000 following the ETFs’ introduction to the market. However, they remain optimistic about a new all-time high in the long term, driven by institutional investors taking advantage of this new trading opportunity.
The introduction of Ethereum ETFs has brought both challenges and opportunities to the crypto market. While some funds like ETHE have faced setbacks due to high fees and competitive pressure, others have seen positive investor interest. As the market continues to evolve, it will be interesting to observe how these new trading vehicles shape the future of Ethereum and the broader cryptocurrency landscape.
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