The first U.S. exchange-traded funds (ETFs) tied to the price of ether, the world’s second-largest cryptocurrency after bitcoin, began trading Tuesday, marking a turning point in the crypto industry’s bid to go mainstream.
Ether ETFs from VanEck, Franklin Templeton, Fidelity, 21Shares and Invesco will begin trading on Cboe, the exchange said in a statement Friday, while one from BlackRock will begin trading on the Nasdaq, according to a statement from the exchange. Products from Bitwise and Grayscale Investments will also begin trading on the New York Stock Exchange on Tuesday, the exchange said.
Following the launch of nine U.S. spot bitcoin ETFs in January, the ether products represent another victory for the cryptocurrency industry’s campaign to push digital assets into the broader financial sector. However, analysts say the products are unlikely to generate the same volume of inflows.
The launch of the Bitcoin ETFs was the culmination of a decades-long conflict with the Securities and Exchange Commission, which had rejected the products over concerns about market manipulation.
The agency was forced to give the ETFs the green light after losing a lawsuit brought by asset manager Grayscale Investments. However, in approving the products, the agency warned that they were still highly risky.
The launch was one of the most successful in the history of the ETF market. According to data from Morningstar Direct, the products attracted $33.1 billion (approximately Rs. 2,77,110 crore) in net inflows by the end of June.
Bitcoin ETF issuers competed fiercely on fees, with many offering to waive fees entirely for a period of time.
Ether ETF fees range from a low of 0.19 percent for Franklin Templeton’s, to a high of 2.5 percent for Grayscale’s existing Ethereum trust, which the company is converting into an ETF, according to its public offering documents. The rest are around 0.25 percent.
In general, the fees are comparable to those of bitcoin products, although issuers offer fewer exemptions.
Grayscale is also introducing a “mini” version of both its ether and bitcoin ETFs with a fee of just 0.15 percent.
While estimates of demand for ether products vary widely, Galaxy Research – whose sister company Galaxy Asset Management has an ether ETF pending with Invesco – has predicted that ether ETFs could attract monthly inflows of $1 billion (roughly Rs. 8,371 crore).
“Overall, market participants expect strong interest in ETH Spot ETFs and significant inflows in the first 3-6 months after launch,” Matteo Greco, research analyst at Fineqia International, wrote in a note. He added that demand for the ether ETFs will be crucial in determining investor interest in digital assets beyond bitcoin.
Issuers began filing applications for the ether ETFs in September. Executives initially had little hope that the SEC would approve the products after discouraging meetings with officials.
But the agency surprised the industry in May when it approved changes to the rules that exchanges need to list the products, the first of two major regulatory hurdles.
SEC Chairman Gary Gensler told Reuters last month that the Grayscale ruling had influenced his view on approving the ether products because the underlying market conditions were similar.
© Thomson Reuters 2024
