Another ether ETF launches — where do the rest stand?
Lack of flows into ether futures ETFs could signal investors await spot products, which the SEC could rule on by May
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It’s been a month since the first ether futures ETFs hit the US market, and demand for such products has remained relatively sparse.
Another ether-related fund offering looking to give investors short exposure to the asset — also via futures contracts — launched Thursday.
The lack of interest in the previously launched ether futures ETFs could signal investors are awaiting spot exposure to ETH — something the Securities and Exchange Commission might be pressured to allow as early as next May.
Six ETFs holding ether futures launched on Oct. 2. About a month later, those funds have roughly $20 million in combined assets under management. The Valkyrie Bitcoin and Ether Strategy ETF (BTF), which changed its investment strategy to include investments in ether futures contracts — effective Oct. 3 — has had flat net flows since then.
Segment observers have pointed to the macroeconomic environment as a reason for the initial relative neglect of ether futures ETFs. Its bitcoin futures predecessor — the ProShares Bitcoin Strategy ETF (BITO) — that saw much higher demand when it launched two years ago came to market amid a bull run, others have noted.
Read more: Underwhelming: week-one demand stays soft for ETH futures ETFs
BITO, which gained $1 billion in assets under management just days after launching, has average daily volumes of about 9.4 million shares, according to Yahoo Finance data. The ProShares Ether Strategy ETF (EETH) has averaged roughly 8,660 shares per day in its first month.
Unlike BITO, which launched on its own, the “batch approval” of half a dozen ether futures ETFs by VanEck, ProShares and Bitwise, may have also hurt their debuts, according to Bloomberg Intelligence analyst James Seyffart.
“If you look at BITO, more volume begets volume, so it was just constantly feeding on itself,” Seyffart said during an ETF Prime podcast last month. “And here we had a bunch of different ETFs listed on the same day, so there was no snowball effect.”
The ProShares Short Ether Strategy ETF (SETH) launched Thursday, a company spokesperson told Blockworks. That fund seeks daily investment results that correspond to the inverse of the daily performance of the S&P CME Ether Futures Index.
As optimism around the potential approval of spot bitcoin ETFs continues to ramp up, various industry watchers expect that funds holding ether directly could follow in short order.
“Once spot bitcoin ETFs are approved, and given that the SEC has allowed CME-traded ether futures ETFs…you combine that with Grayscale’s court victory, spot ether ETFs should be right around the corner,” Nate Geraci, president of The ETF Store, said alongside Seyffart on the podcast.
Ether futures ETFs would essentially become “obsolete” once spot ether ETFs are approved, Geraci argued.
A look at the deadlines
The SEC has until Jan. 10 to rule on a proposed spot bitcoin ETF by Ark Invest and 21Shares.
A decision on spot ether funds could come about four months later, Seyffart said.
Ark Invest and 21Shares shared their intention to launch a spot ether ETF in a Sept. 6 filing. VanEck, which first applied for a spot ether ETF in 2021, renewed its effort to offer such a fund the same day.
Grayscale Investments moved on Oct. 2 to convert its Ethereum Trust into a spot ether fund. Hashdex and Invesco also have filings in front of the SEC to launch products that would hold ETH directly.
The SEC has 240 days — from the time the proposals are published in the federal register — to rule on these products. Plans for the VanEck Ethereum ETF and the ARK 21Shares Ethereum ETF hit the federal register on Sept. 26 and Sept. 27, respectively, setting up an ultimate deadline for the SEC in May.
“I think they’re going to happen,” Seyffart said. “Assuming we do get a spot bitcoin ETF and we are right about that, I think the SEC will be very hard-pressed to find a way to deny spot Ethereum ETFs.”
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