Spot Ethereum ETFs Make $100M Debut: BlackRock Dominates, Grayscale Struggles

In a highly anticipated move, spot Ethereum ETFs began trading in the United States on July 23. The launch marks a significant milestone for the cryptocurrency market but revealed a stark contrast in investor reactions between different funds, particularly highlighting challenges for Grayscale, the world’s largest crypto asset manager.

Mixed Reactions as Spot Ethereum ETFs Launch

Grayscale’s newly converted Ethereum Trust (ETHE) faced a rough start, losing a staggering $484 million on its first day of trading. This exodus is reminiscent of the company’s experience when it converted its Bitcoin Trust to a spot ETF. Analysts predict that ETHE could potentially lose half of its assets under management, translating to around $4.5 billion worth of Ethereum.

The primary reason for the withdrawal appears to be the realization of profits on the large premium gap that existed before the conversion to a spot ETF. Additionally, ETHE’s 2.5% fee is considerably higher than those of its seven competitors, prompting investors to reallocate their funds to more cost-effective options.

Strong Start for BlackRock and Other Competitors

Despite Grayscale’s challenges, the overall debut of Ethereum ETFs showed promise. Bloomberg ETF analyst James Seyffart described the combined inflows for the nine ETF providers as a “very solid first day,” with total inflows amounting to $106 million.

Leading the charge was BlackRock’s ETHA fund, which attracted $266.5 million in inflows. Bitwise’s ETHW spot ETF also performed well, with $204 million on its first day. Other notable performances included Fidelity’s FETH fund, which saw $71 million in inflows, while funds from 21Shares, Invesco, VanEck, and Franklin each received between $7.5 million and $13 million.

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In a strategic move to mitigate the impact of high fees, Grayscale launched an Ethereum Mini Trust (ETH) with a $1 billion AUM starter and a significantly lower fee of 0.15%. This new fund managed to secure $15 million in inflows on its first day, according to preliminary data from Farside Investors.

Market and Price Reactions

Interestingly, Ethereum’s market price did not experience a significant boost with the launch of the spot ETFs. The price peaked at an intraday high of $3,534 on the day of the launch but soon retreated to just over $3,400. By the morning of July 24, Ethereum had recovered slightly, trading at around $3,430.

Market analysts remain cautious yet optimistic. While there are predictions that ETH prices may dip below $3,000 in the short term, the long-term outlook remains bullish. Many believe that as institutional investors increasingly engage with these newly accessible trading vehicles, Ethereum could see a new all-time high.

Also Read: Hong Kong Launches Asia’s First Bitcoin Inverse ETF