Spot Ethereum ETFs Achieve Nearly $600 Million in Trading Volume on Launch Day

Spot Ethereum ETFs Make a Splash on Launch Day

In an impressive debut, the newly launched spot Ethereum (ETH) exchange-traded funds (ETFs) racked up nearly $600 million in trading volume during the first half of their initial trading day, as reported by Bloomberg. This surge highlights the growing interest and participation in the crypto investment landscape.

The frontrunner in this race is Grayscale’s Ethereum Trust (ETHE), which accounted for approximately $250 million of the trading volume by 12:30 PM ET. Following closely is BlackRock’s iShares Ethereum Trust (ETHA), which recorded around $130 million in trades. Other noteworthy performers include Fidelity’s Advantage Ether ETF, with about $77 million in volume, and Bitwise’s Ethereum ETF, which garnered approximately $66 million.

Bloomberg Intelligence’s senior ETF analyst, Eric Balchunas, noted in a post on X that, “We assume $ETHE volume is mostly outflows.” Grayscale’s ETHE, similar to its Bitcoin Trust (GBTC), entered the market with over $9 billion in assets, suggesting that much of its trading activity could be attributed to investors exiting their positions.

On the lower end of the spectrum, Invesco and 21Shares reported that their ether ETFs had not yet crossed the $10 million threshold after four hours of trading, indicating a slower start compared to their competitors.

If trading volume maintains its current trajectory, analysts estimate that these newly launched ETFs could approach around $940 million by the end of their first trading day. This figure would represent just over 20% of the volume experienced by spot Bitcoin ETFs during their inaugural day of trading.

Challenges Ahead: Lower Funding Rates Could Impact Institutional Interest

Looking ahead, analysts have expressed caution regarding the potential demand for ether ETFs, predicting that interest may only reach about 20% of the levels seen with Bitcoin ETFs. Several factors contribute to this expectation, including lower brand recognition and the inability to stake the cryptocurrency while purchasing shares of the funds.

Another critical factor is Ethereum’s current funding rate. Markus Thielen, founder of 10x Research, pointed out that when Bitcoin ETFs launched in January, the funding rate hovered around 15%, eventually skyrocketing to 70% in February. This dynamic attracted numerous institutional arbitrage funds, which capitalized on the price spread by buying the ETFs and shorting the futures contracts, thereby creating a self-reinforcing cycle of bullish sentiment.

In contrast, Ethereum’s funding rate is presently much lower, ranging between 7% and 9%. Thielen suggests that this diminished rate may deter institutions from considering the funds for arbitrage investments, particularly in the context of current interest rates being at 5%. He stated, “Contrary to the strong Bitcoin Spot ETF flows in February, Ether ETF flows will likely not attract those arbitrage flows instrumental in driving positive sentiment.”