Katherine Ross

David Canellis

Today, enjoy the Empire newsletter on Blockworks.co. Tomorrow, get the news delivered directly to your inbox.&nbsp;<a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">Spot the (ETF) difference</h2>



Crypto secures another milestone today: Spot ether ETFs <a href="https://blockworks.co/news/ether-etfs-approved-for-us-exchange-july-23">start trading in the US</a>.



But it could be that whatever good things come Ethereum’s way as a result will be largely overshadowed by what happens to other cryptocurrencies.



As was the case with bitcoin, there are already loads of investment products physically backed by ether available outside of the US. TrackInsight counts 30 with almost $2.6 billion in ETH under management, the equivalent of about 730,000 ETH.



And then there’s Grayscale Ethereum Trust (ETHE). It has $9.2 billion in ETH — over three and a half times as much as the global products combined — which works out to be almost 2.2% of the circulating supply.



Bulls may look for Grayscale’s new low-fee Ethereum Mini Trust, which is designated to receive 10% of the larger Trust’s ETH, to lead the charge in accumulating tons of ETH.&nbsp;



The data suggests that it might be more reasonable to look to the debuntents for that. ETHE, which will transform into an ETF as the other spot funds launch, has been bleeding crypto ever since the first half of 2021.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe8Jxk_6GXkOO3Vc7ccliamNsjOnhIeZFNA1UaTvSLU6V2Hkt4E0Wm8bYUFfGutnDkDMxw2WPVjjVJClC9XRFA1h6J80sNKnRzLlw23KOxAvH6Tw8ynSyi94EyXFMGOJO1PSGUNU71TumDMEpbtoHQx8lhL?key=qQpB8Es8ihL0tl5Ptmx4EA" alt=""/><figcaption class="wp-element-caption">Ether has gone up and down but the collective trend has been largely the same</figcaption></figure>



A string of newer products, however, have picked up some of the stack, albeit on a much smaller scale to the wave of ETH inflows Grayscale recorded between mid-2019 and late 2020.



Entities from CoinShares, VanEck, 21Shares and CI-Galaxy, among others, saw the largest inflows around the time of ETH’s all-time high in November 2021.&nbsp;



Interest waned throughout the bear market. Treating the top six by AUM as a cohort shows they slowly shed coins until markets really picked up last October.



But zooming into each entity individually shows some bought the dip. VanEck’s VETH, CoinShare’s ETHE (not to be confused with Grayscale’s product with the same ticker) and 21Shares’ AETH have been steadily accumulating ETH ever since they launched.



Those three products have gone from an estimated 178,750 ETH ($630.3 million) to 276,000 ETH ($973.2 million) over the past three years, an increase of more than 55%.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfa7nvabM-DjSl1EFPIJU_foPoj3LJpZTZs_WCczq1cbsH5Kg8_j1MatBu2aVS0bvI2vWuZUTkIBvklauVlcQQycCU7P9OHIp2oQhE_g7lpa_dSakb7Fs4Ig-WU-k7qrr-qzVnXx4I4WEOUtP4Ym5pYgNHZ?key=qQpB8Es8ihL0tl5Ptmx4EA" alt=""/><figcaption class="wp-element-caption">Slow and steady growth amid a major crash after Terra</figcaption></figure>



Keep in mind that the figures on these charts are broad estimates. Entities generally don’t publish historical data for how much actual ETH they hold per day.&nbsp;



Instead, AUM data was pulled from TradingView and cross-referenced with daily asset prices to generalize how much ETH each product was holding.



Interestingly, a more dominant trend shows up in the data for investment products backed by solana (SOL).



There are six spot SOL products on the market, including Grayscale’s Trust. All of them bar one saw their SOL-denominated AUMs grow as SOL struggled following the collapse of FTX.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXehND-5n85SebHVsR-2aceNQVhcva0j2uzWQZEhE_9XaHUQrMOonM7_8mXCF0runFx9nD6NXAUKyn6ioszqFKufO8NTRWyrSAzZziLuxycKh8QZ79JUo4fw6JADoEBRm-Bd1F4I72JocvQ7PcRCE_HE4mY?key=qQpB8Es8ihL0tl5Ptmx4EA" alt=""/></figure>



Back then, they held about 3 million SOL ($534.4 million) altogether — today they hold an estimated 8.31 million SOL ($1.48 billion).&nbsp;



That’s growth of nearly 180%, far more than the 55% growth recorded for the seven analyzed ETH equivalents.



Granted, it took a few weeks for bitcoin’s price to hit its stride after spot ETFs launched. Still, it could be that ETH opened the floodgates for other cryptocurrencies to find their own way into spot ETFs, somewhere down the line.&nbsp;



In which case, parts of the market could end up betting on whatever coin might be next, rather than what’s right in front of them.



— David Canellis



<h2 class="wp-block-heading">Data Center</h2>



<ul class="wp-block-list">
<li>ETH is even for the past day and up 2.6% over the past week, now just under $3,500. BTC is meanwhile down 1% to $66,666.</li>



<li>ENS has broken out, currently up 13% on the daily candle to lead CoinGecko’s front page.</li>



<li>Solana is the no. 1 chain for DEX <a href="https://defillama.com/dexs/chains">volume</a> in the past week, recording $14.52 billion compared to $12.1 billion on Ethereum mainnet.</li>



<li>$288 million in crypto has flowed out of Ethereum bridges this week, per DeFiLlama.&nbsp;</li>



<li>Optimism and Polygon bridges have seen the most inflows — $93 million and $20.9 million — respectively.</li>
</ul>



<h2 class="wp-block-heading">It’s all happening</h2>



Another set of crypto ETFs are finally here.



Some seem caught between the bullishness of another set of crypto ETFs launching six months after bitcoin ETFs were greenlit, and the fact that these funds weren’t able to offer staking yields.



“Holding ETH without staking is akin to holding dollars in a ‘checking’ account instead of a ‘savings’ account,” Adam Levine, senior vice president of corporate development and partnerships at Fireblocks told me. “Nobody would want to hold billions of dollars without earning interest. Holding an ETH ETF without staking is essentially that situation. Staking is a way to generate a return on the ETH with relatively low risk.”



He wouldn’t be surprised if the existing ETH ETF issuers moved towards staking as soon as the SEC allowed it.&nbsp;



Though, let’s be clear, the SEC didn’t seem so happy about the staking language earlier this spring, when we all thought the ETFs had no shot at approval this year. It’s unclear what could change the current agency’s mind. This November could bring the winds of change, however.&nbsp;



Then there’s also the fact that the ether futures ETFs were met with “underwhelming demand,” Will Cai, Kaiko’s head of indices, wrote.&nbsp;



“Although a full demand picture may not emerge for several months, ETH price could be sensitive to inflow numbers of the first days,” he said.&nbsp;



One thing’s for sure: Everyone’s going to be reading into the flows for the next few weeks.&nbsp;



Bitcoin ETFs have been incredibly successful, but the narrative has taken months to play out. It’s not at all surprising that it could be the same for ETH ETFs, especially given that Grayscale is similarly converting its ETH fund to an ETF.&nbsp;



Framework Ventures co-founder Vance Spencer warned that the two ETFs shouldn’t be tossed in a bucket together. But overall, he’s taking a bullish approach to the products.



“I don’t think that the institutional flows for the ether and bitcoin ETFs will be mutually exclusive. The two networks have entirely different use cases and market structures. If Bitcoin is digital gold, then perhaps it’s best to describe Ethereum like Apple, as it is a platform, almost like an app store, but for open finance,” he told Blockworks.&nbsp;



Spencer continued: “I believe it&#8217;s likely that institutional investors will seek exposure to both of these perspectives by including the Ethereum ETF in their portfolios. Just like how tech investors might purchase a basket of FAANG stocks, I think many investors will soon seek new types of crypto exposure beyond bitcoin ETFs, and the launch of the Ethereum ETF will kickstart that trend.”



He argues that it’s a glass-half-full scenario. If you’re a pessimist, then perhaps you prefer a bitcoin ETF. But if your investing narrative is a bit more optimistic, then the ETH ETFs may be perfect for you.



For some investors, the ETH ETFs will serve as a gauge for how the market would react to more crypto ETFs like, let’s say, a solana fund. While the SEC may not be there yet, crypto’s notorious for jumping 500 steps ahead when the industry’s feeling bullish.&nbsp;



But the price reaction will also be interesting. Will we see fresh all-time highs from ETH the same way we did for bitcoin?&nbsp;



Bybit thinks we could, for example, see a 70% increase by year-end, with a price target of $5,160.



— Katherine Ross



<h2 class="wp-block-heading">The Works</h2>



<ul class="wp-block-list">
<li>Bitwise will donate 10% of profits from its ether ETF to Protocol Guild and PBS Foundation, the issuer <a href="https://x.com/BitwiseInvest/status/1815486261337182504">announced</a>.</li>



<li>Hamilton Lane announced that it’s launching a private credit fund on Solana, Fortune <a href="https://fortune.com/crypto/2024/07/23/hamilton-lane-becomes-first-asset-manager-to-launch-a-fund-on-solana-blockchain/">reported</a>.&nbsp;</li>



<li>Bitcoin worth roughly $2.8 billion was transferred by Mt. Gox per <a href="https://t.co/pcShX3mbF1">Arkham Intelligence</a>.&nbsp;</li>



<li>Polymarket carved out a new all-time high in July, hitting trading volumes of $213 million, Blockworks <a href="https://blockworks.co/news/polymarket-july-all-time-high-trading-volumes">reported</a>.</li>



<li>BlackRock’s bitcoin ETF recorded inflows of over $500 million, <a href="https://www.theblock.co/post/306833/blackrock-ibit-inflows-526-million?utm_source=rss&amp;utm_medium=rss">notching</a> a high not seen since March.&nbsp;</li>
</ul>



<h2 class="wp-block-heading">The Riff</h2>



Q: Are people still excited about the ETH ETFs?



It’s been such a long and weird journey to get here, and the news isn’t the sole focus right now unlike when the bitcoin ETFs launched back in January.&nbsp;



I think there is a decent amount of excitement bubbling under the surface. But there’s also a bit of a “make it or break it” narrative playing out too.&nbsp;



Bitcoin ETFs carved out the path, but now ETH ETFs will be expected to follow in their footsteps and that is a bit daunting.&nbsp;



The two are inherently different though, as I wrote above, and obviously crypto investors are aware of that. But, how familiar are institutions?&nbsp;



I guess we’ll see, but I think there are a lot of reasons for the excitement and overall momentum to keep up. And I think we’ll really find it in the way people analyze and react to the funds flows.&nbsp;



— Katherine Ross



You can probably forgive any lack of excitement. We’ve been bombarded by potential catalysts, both positive and negative, so many times this year.



Beyond the major runup leading up to the launch of spot bitcoin ETFs — which excitingly culminated in a new <a href="https://blockworks.co/news/bitcoin-all-time-high">all-time high for bitcoin</a> — markets have been relatively boring.



Mt. Gox distributing billions in bitcoin to creditors? Mostly “meh.”



The German state of Saxony dumping billions in seized bitcoin? Big whoop, even with the short-term volatility.



Trump saying nice things about bitcoin? It surely hasn’t hurt, but there’s been no real big pump to be seen…yet.



So, by the time the SEC comes around to formally approve ETH ETFs for launch, no wonder ETH is still nearly 30% below its 2021 record high. Maybe the news is moving too fast for the markets to care.&nbsp;



Or, maybe, all the new developments are just the hum-drum of an asset class that’s no longer nascent. Great, I guess!



— David Canellis&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Empire Newsletter

Can ETFs make ETH the next big tech stock?

Ben Strack

The first ETFs to hold ether futures contracts launched Monday, with fund groups like VanEck, ProShares, and Bitwise Asset Management competing for assets.



Volatility Shares, the firm that kickstarted the latest wave of filings for such products in July, no longer intends to launch an ether futures product, a person familiar with the firm’s plans told Blockworks.&nbsp;



<h2 class="wp-block-heading">The initial competitors</h2>



VanEck on Monday launched its Ethereum Strategy ETF (EFUT), which invests in standardized, cash-settled ETH futures contracts traded on exchanges registered with the Commodity Futures Trading Commission. The fund joins a bitcoin futures ETF the firm launched in 2021.&nbsp;



“While investors still do not have the means to gain exposure to digital assets here in the US via a spot ETF product, we’re very pleased to be launching EFUT as a means to access the robust futures market that has developed around ETH itself,” Kyle DaCruz, VanEck’s director of digital asset product, said in a statement.&nbsp;



Meanwhile, ProShares and Bitwise Asset Management launched multiple ether-related ETFs Monday.&nbsp;



Read more: <a href="https://blockworks.co/news/sec-consider-ether-futures-etfs">SEC now ready to consider ETH futures ETFs, sources say — but what’s changed?</a>



The ProShares Ether Strategy ETF (EETH) began trading on the New York Stock Exchange. The firm also brought to market the ProShares Bitcoin &amp; Ether Equal Weight Strategy ETF (BETE) and its Bitcoin &amp; Ether Market Cap Weight Strategy ETF (BETH).



The three funds join ProShares’ Bitcoin Strategy ETF (BITO) — the first bitcoin futures ETF to market in the US, which now has about $860 million assets under management.&nbsp;



Like ProShares, Bitwise is offering investors choice in how they want to access exposure to ether futures. The company launched its Ethereum Strategy ETF (AETH) and Bitcoin and Ether Equal Weight Strategy ETF (BTOP) on Monday. 



Competing crypto ETF issuer Valkyrie <a href="https://blockworks.co/news/ether-futures-etfs-launch-soon">began adding ether futures contracts</a> to its bitcoin futures ETF on Thursday as part of an investment strategy change set to go into effect on Oct. 3, a spokesperson told Blockworks Thursday. But the firm said in a Friday filing that it would <a href="https://blockworks.co/news/valkyrie-etf-ether-futures-unwind">“unwind” its positions in ether futures contracts</a> until the investment strategy is officially amended.&nbsp;



Meanwhile, a source familiar with Volatility Shares’ plans said the company chose to ditch its ether futures ETF plan due to losing its potential “first-mover advantage.” Such an advantage is critical for smaller issuers going up against rivals with bigger marketing budgets, the person added.



Read more: <a href="https://blockworks.co/news/volatility-shares-eth-futures-etf">Volatility Shares not giving up on ETH futures ETF effort</a>



Volatility Shares was in position to potentially launch the first fund with pure exposure on Oct. 12. But ether futures ETFs were able to come to market ahead of schedule as the US Securities and Exchange Commission appeared to accelerate such launches to prepare for a potential government shutdown.&nbsp;



The regulator did not return a request for comment.&nbsp;&nbsp;



VolatilityShares is not the only firm to abandon its ether futures ETF plans.



Roundhill Investments requested to withdraw its application for such a fund in a Sept. 29 filing to the SEC.&nbsp;



Kelly ETFs founder Kevin Kelly told Blockworks in an email Monday the firm is not launching its proposed ether futures ETF.&nbsp;&nbsp;



<h2 class="wp-block-heading">Products look to stand out</h2>



Nate Geraci, president of The ETF Store, said in August he expects the demand for ether futures ETFs to be “fairly limited overall.”&nbsp;&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I expect demand for ETH futures ETFs to be fairly limited overall… BTC futures ETFs have &lt; $1.5bil AUM &amp; much of that came in first few days post-launch. Combined BTC + ETH futures ETFs prob best path to succeed for now IMO. Ultimately, investors want real deal (spot ETFs). <a href="https://t.co/hNx61wmYbz">https://t.co/hNx61wmYbz</a>&mdash; Nate Geraci (@NateGeraci) <a href="https://twitter.com/NateGeraci/status/1687229563212824576?ref_src=twsrc%5Etfw">August 3, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Bloomberg Intelligence’s Eric Balchunas said in a Friday X <a href="https://twitter.com/EricBalchunas/status/1707872247791185998">post</a> he estimates all ether futures ETFs to have about $200 million in assets under management by the end of the first week of trading.&nbsp;



BITO quickly amassed $1 billion in assets when it launched ahead of competitors in October 2021. But with a more crowded field of ether futures ETF issuers launching at or around the same time, industry watchers have said marketing and fees will be key.



VanEck’s product carries an expense ratio of 66 basis points. The Bitwise funds charge 85 basis points, while the ProShares offerings cost 95 basis points.&nbsp;



As for marketing, VanEck had been teasing the upcoming launch of EFUT last week, posting a <a href="https://twitter.com/vaneck_us/status/1707419473337033075?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1707419473337033075%7Ctwgr%5E2944f8bab5605f486fa8429b85307f1b9a9ee0c9%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fblockworks.co%2Fnews%2Fether-futures-etfs-launch-soon">video</a> on its X page Thursday inviting investors to “enter the ether.”



“As we&#8217;ve been saying both with ETH futures, but especially with spot bitcoin, it will be a marketing war like we&#8217;ve never seen since they all do [the] same thing and launch on [the] same day,” Balchunas said in an X <a href="https://twitter.com/EricBalchunas/status/1707421312518386086">post</a> in response to the VanEck video. “Unprecedented.”



VanEck added in a Friday X <a href="https://twitter.com/vaneck_us/status/1707888396171977036">post</a> that it plans to donate 10% of its profits from EFUT to Protocol Guild — a collective of 152 Ethereum core protocol contributors.&nbsp;



“Marketing war has definitely begun,” Bloomberg Intelligence analyst James Seyffart said in response to the announcement on X.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Friday night fun. 10% of Vaneck’s profits on their Ethereum ETF <a href="https://twitter.com/search?q=%24EFUT&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$EFUT</a> are gonna go to <a href="https://twitter.com/ProtocolGuild?ref_src=twsrc%5Etfw">@ProtocolGuild</a> which is an org made up of ETH core developers. So basically going back into the ETH ecosystem in a way. Marketing war has definitely begun <a href="https://t.co/mCruFnOdap">https://t.co/mCruFnOdap</a>&mdash; James Seyffart (@JSeyff) <a href="https://twitter.com/JSeyff/status/1707889507775762524?ref_src=twsrc%5Etfw">September 29, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



ProShares highlighted in a Friday news release that it is the issuer of BITO, the largest crypto-linked ETF. It has also touted the greater optionality it is offering compared to VanEck and Bitwise with its three ether-related funds.



“We believe that BETE and BETH are groundbreaking in that they offer investors the opportunity to target the performance of the two leading cryptocurrencies in their brokerage accounts through one transaction with a single ticker,” CEO Michael Sapir said in a statement. “We are offering two weightings depending on an investor’s desired exposure.”



Bitwise CIO Matthew Hougan said the difference between his firm and the other initial issuers of ether futures ETFs is the level of crypto expertise.



“We&#8217;re excited to see big traditional equity assets managers come into the market; it&#8217;s a great validation of the space,” Hougan told Blockworks in an email. “For investors, the difference with Bitwise is that crypto is all that we do.”



Read more: <a href="https://blockworks.co/news/bitwise-matt-hougan-spot-bitcoin-etf-price-discovery">New Bitwise research seeks to fill gaps in rival bitcoin ETF proposals</a>



VanEck and ProShares have 67 and 137 ETFs trading in the US, respectively, according to ETF.com — funds across an array of asset classes.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



“Every day at Bitwise, 64 investment professionals show up to work and all we do is study crypto,” Hougan added. “We have the builders, regulators, technologists, venture capitalists and entrepreneurs on speed dial.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

ether ETFs

Fight for assets begins as ETH futures ETFs debut

Macauley Peterson

<div id="highlights-block_631f885af30f8" class="highlights">
 <ul>
 <li>The Merge Panda is on sale for 0.05 ETH, with the proceeds going to fund Ethereum core development</li>
 <li>The rate of issuance post-Merge will depend on the amount of ether staked</li>
 </ul>
 
</div>



Part mascot, part infographic, the Ethereum Merge panda bear is set to become the quasi-official Merge NFT, with its seven-day sale on NFT marketplace, Zora.



Unrelated, but of longer term significance, is the prognostications by supporters of “ultra sound money” — the memey notion that the Merge will make ether a deflationary asset.&nbsp;



The <a href="https://ultrasound.money/" target="_blank" rel="noreferrer noopener">Ultra Sound Money website</a> allows prospective investors to simulate a variety of parameters that will determine whether staking issuance exceeds demand.



<h3 class="wp-block-heading">Panda fusion</h3>



Ethereum’s panda meme, inspired by the manga <a href="https://knowyourmeme.com/memes/dragon-balls-fusion" target="_blank" rel="noreferrer noopener">Dragon Ball Z &#8220;fusion dance&#8221;</a> and <a href="https://youtu.be/nNmdk2Zzm5k?t=97" target="_blank" rel="noreferrer noopener">made famous</a> by influencers such as Anthony Sassano, shows two bears — one black and one white, symbolizing the consensus and execution layers of proof-of-stake Ethereum — merging into a panda.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/ Everyone knows pandas = Merge 🐼 we&#39;re _thrilled_ that the OG meme will be available to mint in New Home of the Heart!! 🏠❤️ proceeds go to:<a href="https://twitter.com/icebearhww?ref_src=twsrc%5Etfw">@icebearhww</a>: meme creator<a href="https://twitter.com/CW_Cnatch?ref_src=twsrc%5Etfw">@CW_Cnatch</a>: original illustrator <a href="https://twitter.com/ProtocolGuild?ref_src=twsrc%5Etfw">@protocolguild</a>: Eth Merge devs<a href="https://t.co/S65d7XFNg4">https://t.co/S65d7XFNg4</a> ↓ backstory ↓&mdash; JPG (pronounced jpeg) (@______jpg______) <a href="https://twitter.com/______jpg______/status/1568973769313501185?ref_src=twsrc%5Etfw">September 11, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Half the funds from the 0.05 ETH ($85.60) mint will be used to fund Ethereum core development, with the other 50% shared between the meme’s creator, non-profit animal welfare organizations, Gitcoin Grants and Shonen Jump, a weekly shōnen manga anthology published in Japan, according to the sale description.



The original illustration is credited to Thai artist “<a href="https://www.facebook.com/cw.cnatch" target="_blank" rel="noreferrer noopener">CW.Cnatch</a>,” who will receive 25% of the NFT proceeds.



Ethereum core development funds will be distributed through the <a href="https://protocol-guild.readthedocs.io/" target="_blank" rel="noreferrer noopener">Protocol Guild</a>, a collective of protocol contributors, via <a href="https://app.0xsplits.xyz/accounts/0xc521077fa5AF161c88A945da5c00DE1022B1e859/" target="_blank" rel="noreferrer noopener">an on-chain split</a> administered by <a href="https://stateful.mirror.xyz/" target="_blank" rel="noreferrer noopener">Stateful Works</a>.


<div class="wp-block-image">
<figure class="alignright"><img decoding="async" src="https://lh4.googleusercontent.com/khKRhIE0YOXHXcqMtiTPIzab63LW04QRy8ZomGPTkmnmosk6We_WkPE5A_rwsBn78eRZ_Y6y2S4jf_XOxMyRwphN1WgtlOzqw3oYfxNdW0enUyPzDjqTKM8rwOZpl6rLHURJVM1AA6PtS4fA9WQqep1_zoxqKDe93-UTiAgZuxTtUmtSMJIrpbjmPg" alt=""/><figcaption>Source: <a href="https://www.google.com/search?q=ethereum+merge" target="_blank" rel="noreferrer noopener">Google</a></figcaption></figure></div>


Even Google is in on the panda act; search queries for “<a href="https://www.google.com/search?q=ethereum+merge" target="_blank" rel="noreferrer noopener">Ethereum Merge</a>” now display an estimated time and an image of the black and white bears — with ether symbols as belly-buttons — getting closer, in sync with the countdown.



<h3 class="wp-block-heading">Ultra Sound Money bat signal</h3>



Bitcoin’s narrative as digital gold is based in large part on its disinflationary design (not to be confused with deflationary).&nbsp;



The assets’ so-called halvenings — <a href="https://www.thehalvening.com/" target="_blank" rel="noreferrer noopener">memes in themselves</a> — hard-coded into the protocol, reducing the BTC reward to proof-of-work miners by half every four years. The next such reduction is set for sometime around May 2024, and the process will, in theory, continue into the next century, as the asset approaches its finite supply of 21 million bitcoins.



Ethereum has never had a cap on the supply of ether, nor does the soon-to-be-retired proof-of-work chain undergo halvings. But, to Ethereans excited by the Merge, in about 60 hours it will undergo something similar, dubbed the “<a href="https://ethmerge.com/?q=what-is-the-triple-halvening" target="_blank" rel="noreferrer noopener">Triple Halvening</a>.”


<div class="wp-block-image">
<figure class="alignright size-medium"><img loading="lazy" decoding="async" width="300" height="133" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Screenshot-2022-09-12-at-17.25.47-1-300x133.png" alt="" class="wp-image-31075" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Screenshot-2022-09-12-at-17.25.47-1-300x133.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Screenshot-2022-09-12-at-17.25.47-1-300x133.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Screenshot-2022-09-12-at-17.25.47-1-300x133.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Screenshot-2022-09-12-at-17.25.47-1-300x133.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Screenshot-2022-09-12-at-17.25.47-1-300x133.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Screenshot-2022-09-12-at-17.25.47-1-300x133.png?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/Screenshot-2022-09-12-at-17.25.47-1-300x133.png?w=722 722w" sizes="auto, (max-width: 300px) 100vw, 300px" /></figure></div>


As miners cease to be relevant at the moment of the Merge, the ether issuance rate is expected to be reduced by roughly 90%, equivalent to three simultaneous ‘halvenings.’&nbsp;



Miners are typically forced to sell their rewards to pay for expenses like equipment and electricity. By contrast, ether issued to validators through staking rewards can potentially be reinvested into additional validators, and sold more strategically — or so goes the bull case. 



Demand drivers include staking demand, ether burned through usage and the ordinary need by dapps for blockspace.



<h3 class="wp-block-heading">Meme meets reality?</h3>



That global decline in ether issuance — thanks to the end of proof-of-work mining — coupled with these various sources of demand is what underpins the Ultra Sound Money meme.



No one knows whether demand will in fact outstrip supply, but we can model the variables and make an educated guess.



For instance, at the current stake rate, Ethereum becomes deflationary at a base fee rate of 15 <a href="https://www.investopedia.com/terms/g/gwei-ethereum.asp" target="_blank" rel="noreferrer noopener">gwei</a>, according to Ultrasound.Money.



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/BsPcar37edUY_zUPSCG8Fs7KOuJVQOGsVhTS3KN4MmXM0HTakNf32hgJlZr5LUl8ZLdhhooQI7PlOvgdGdWtcOg1Jdz-IfMfwFa6iCqqG_bEKX81sMowOUbWJD4iQFhRSxFr8yE1ufG7ORVjzJodWdal3u1qoUNeztZjyDOE5pWolghsSUyuq2SqdQ" alt=""/><figcaption>Source: <a href="https://ultrasound.money/" target="_blank" rel="noreferrer noopener">ultrasound.money</a></figcaption></figure>



That’s greater than the <a href="https://etherscan.io/gastracker#historicaldata" target="_blank" rel="noreferrer noopener">historical gas fees</a> paid about half the time over the past seven days.



If demand for ether rises, the asset could become deflationary most, or even all of the time. On the other hand, as more ether is staked to secure the network, issuance could increase, raising the base fee rate required to maintain a deflationary posture.



What is sure, is that over <a href="https://twitter.com/i/lists/1376636817089396750/members" target="_blank" rel="noreferrer noopener">five thousand Twitter users</a> have added the bat signal meme to their profiles, an homage to the concept of Ultra Sound Money. And upwards of <a href="https://beaconcha.in/" target="_blank" rel="noreferrer noopener">425,000 validators</a> have each staked 32 ETH to get a piece of the action.



As of press time, <a href="https://create.zora.co/collections/0x97d5dc811642aecebb149aec5c79b8252a4724a9" target="_blank" rel="noreferrer noopener">118 panda NFTs</a> have also been sold, netting $10,000 in ether.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>