Ethereum ETFs Pump Out $1B in Trading Volume. But When Record?

24 ביולי

The novel asset class debuted for trading on Wall Street with about a billion dollars worth of trades. But Ether’s price didn’t move an inch. In fact, it dropped, confusing traders who were expecting a more impressive performance by the megacap token. What happened?

Ether ETFs Make a Splash on Wall Street

Ethereum (ETHUSD), the second-largest cryptocurrency after Bitcoin (BTCUSD), made its debut as an exchange-traded product this week. A total of nine spot Ethereum exchange-traded funds (ETFs) landed for their first deals on Tuesday. Packaged by eight different issuers, these new investment vehicles generated a buzz with $1 billion in volume traded, or the entire value exchanged between back-and-forth trades.

The cool thing about this milestone event is that ordinary consumers and professional money managers can get their hands on a Bitcoin alternative — these ETFs hold genuine Ethereum. And while buyers can’t get custody over the digital asset itself (that’s for the issuers to handle), they can buy shares of the ETFs and get the same volatility and price exposure as if they were holding the actual product.

And that’s where the value proposition kicks in — buyers don’t need to be tech-savvy, get a cold wallet and silently mumble a 24-word seed phrase every time they access the blockchain. They can log into their brokerage account and snap up some spot ETH ETF shares.

A Price Show Similar to Bitcoin’s Pump

Markets saw that same narrative play out picture-perfect with the launch of 11 spot Bitcoin ETFs. Back in January, the Securities and Exchange Commission gave its nod to the long-awaited crypto products and shortly after, the orange token blasted off to a record high of more than $73,000 per coin.

It must be said that the all-time high didn’t arrive immediately. But there was a solid build-up in the days and weeks before the official rollout. A price increase of a formidable size.

Analysts had expected a similar scenario to unfold for Ethereum. Only that, there wasn’t a powerful pump in the price — not before, not immediately after the launch of the ETFs. Why was that?

Why Ether Can’t Walk in Bitcoin’s Footsteps

Some big differences can be spotted. The spot Bitcoin ETFs exchanged about $4.6 billion in trading volume on day one, or about five times more than what Ethereum achieved. The second most valuable token pulled in about $107 million of net inflows — the money that stayed in teh funds after the money that had left — on its first day as an ETF product.

Moreover, Ethereum is far less popular as a store of wealth and an investment asset. It’s the place where DeFi dApps and NFTs run on smart contracts (excuse the jargon, but it’s a good way to make a point).

Ethereum doesn’t have the big digital currency/digital gold/payment method aura like Bitcoin. Instead, it operates as a platform where geeks program immutable contracts that lay out the infrastructure of the next internet era — Web 3. To illustrate, think of Bitcoin as crypto’s gold (XAUUSD), while Ethereum could be likened to Nvidia (ticker: NVDA) (in its early days, though) — the technology player that paves the way to the next big thing.

Bullish Narrative Remains Intact

This said, the big guys on Wall Street are nonetheless bullish. The asset managers that launched these new ETF products, including Fidelity, Grayscale, and BlackRock, are lowering the entry barrier to Ethereum as a technology alternative to Bitcoin’s speculative cred.

Against this backdrop, the price of Ethereum stayed flat and even dipped a little. The token was hugging the flatline around $3,460 per token and was down about 1% a day after the big launch. Still, Ethereum is up about 50% on the year, exactly the same pace as the rise of Bitcoin for the same time span.

More importantly, the door was cracked a little more open for another spot crypto product that wanted to rub shoulders with traditional assets, such as bonds, stocks and currencies.

What’s Your Prediction?

Is Ethereum going to repeat the success of Bitcoin now that it has ETFs to shake up the price? Let us know in the comments!