| In what is being heralded as yet another milestone for the digital asset space, US exchange-traded funds investing directly in Ether began trading on Tuesday — an outcome that seemed like only a distant possibility just a few months ago. While the debut of the funds comes after the successful launch of spot Bitcoin exchange-traded funds in January, the first crypto ETFs in the US, Ether's official foray onto Wall Street has reinvigorated excitement that there may be a sliver of hope for future products based on smaller tokens. After all, Ether — widely perceived as the leader of the altcoins — had a more controversial narrative compared with its larger and more established peer. (As it stands now, a couple of issuers already have submitted filings for ETFs investing in Solana, the fifth-biggest cryptocurrency.) The road to the begrudging approval wasn't easy. ETF issuers appeared to make several concessions to win the backing of US regulators, particularly when it came to staking, or the process of earning rewards for blockchain maintenance. Staking raises questions about whether Ether should be treated as a security as opposed to Bitcoin, which is viewed as a commodity. The fact that ETFs won't be staking their Ether — and, crucially, passing the rewards received along to shareholders — also raises questions about demand for the new funds. As a result, the road to Bitcoin-ETF-level success is unlikely to be smooth. Recent estimates from Citigroup predict the cohort could see inflows of between $4.7 billion to $5.4 billion in the six months after they debut. For context, BlackRock Inc.'s Bitcoin ETF alone crossed the $1 billion threshold less than a week into trading. Still, that didn't stop major players from throwing their hats into the ring. Several of them seem to have learned from the competitive fee war earlier this year. Last week, issuers posted dirt-cheap expense ratios from the get-go, with Grayscale revising its mini-fund's fee to 0.15% the next day — the lowest in the group. And most are at least partially waiving their fees at the start. The outlook for weaker demand could be attributed to two other big reasons. First, ETF investors who want crypto exposure may have already gotten it through Bitcoin ETFs, which thus far have seen net inflows of $17 billion since their debut. Second, Ether needs to crystallize its elevator pitch. Unlike Bitcoin, which can be easily packaged as "digital gold" or an "an inflation hedge," Ether still struggles to differentiate itself, to advisers at least, on what it really is. An informal X poll by Bloomberg Intelligence found that "programmable money" won the most votes as a potential tagline. But that still raises follow-ups. What does this ambiguity mean moving forward? A reasonable comparison could be gold and silver ETFs, BI strategists Eric Balchunas and James Seyffart wrote. Investors simply aren't as interested in silver as they are in gold, especially if they already own gold. The outcome? Silver ETFs have $17 billion in assets — just about 15% of what gold ETFs own. Still, more than $1 billion worth of shares of the nine ETFs traded on their first day, which is a blockbuster debut. Maybe Ether will prove naysayers wrong after all. | 
No comments:
Post a Comment