As dawn broke on Tuesday, the crypto financial markets witnessed a pivotal moment for Ethereum (ETH) spot exchange-traded funds (ETFs), marking a significant turnaround in their fortune for the first time in nearly two months. The air in the cryptocurrency investment community has been somewhat stagnant of late, especially concerning these crypto-based investment vehicles. Throughout September, ETH ETFs languished, failing to captivate investors or capitalize on the broader market rallies that hinted at a resurgence in the crypto sector.
Revival of Ethereum ETFs
The preceding weeks have not been kind to Ethereum ETFs, with the funds experiencing their sixth successive week of negative net flows, culminating in a substantial $26.26 million in outflows. While their Bitcoin (BTC) counterparts basked in a modest resurgence, enjoying their second consecutive week of positive inflows, Ethereum-based products stuck out as anomalies, struggling to capture investor interest. CoinShares’ weekly digest highlighted this troubling trend, underscoring the challenges faced by ETH ETFs.
The past month was particularly trying, with significant outflows from the Grayscale Ethereum Trust (ETHE) and tepid responses to newly launched ETFs contributing to a sense of disappointment. A report from Bitcoinist shed light on a peculiar situation where, on two separate occasions—August 30 and September 2—there were neither inflows nor outflows reported across all issuers, a phenomenon unseen since the advent of U.S.-based spot crypto ETFs in January.
Moreover, the trading volume of spot ETH ETFs has been lackluster. Comparison with periods before their official launch indicated that recent trading volumes amounted to a mere 15% of what was recorded during their inaugural week in the U.S., betraying a notable disinterest or hesitancy among investors.
The situation seemed to deteriorate further as the present week commenced, with these ETH-focused financial products enduring one of their gloomiest days since their inception in late July—a staggering $79.3 million was pulled from these funds on Monday alone.
This dismal performance charted Ethereum ETFs’ fifth largest day of negative net flows since their initiation and marked their most challenging period since July 31. While most funds stagnated with no significant movements, ETHW managed a modest inflow of $1.3 million. However, these were dwarfed by the substantial outflows from ETHE, which led the downturn with $80.6 million escaping its clutches.
In an astonishing twist of fate, Tuesday witnessed a dramatic reversal of fortunes for U.S. Ethereum spot ETFs, as noted by Mads Eberhardt, a senior analyst at Steno Research. These funds attracted a remarkable $62 million in inflows, pulling themselves out of the previous day’s abyss and into a brighter spotlight. Blackrock’s ETHA spearheaded this recovery with an impressive $59.3 million in positive flows, while VanEck’s ETHV and Invesco’s QETH added mildly with $1.9 and $1.3 million, respectively. Remarkably, all issuers, including Grayscale’s ETHE, reported no outflows on this day, marking it as one of the most successful days since their downturn began in July, particularly highlighting August 6 as the previous high-water mark.
Regulatory Hiccups for Ethereum ETFs
In an unexpected regulatory maneuver, the U.S. Securities and Exchange Commission (SEC) unveiled its decision to postpone the deadline regarding its contemplation on the proposed rule changes by the Nasdaq International Securities Exchange (ISE) to list and trade options based on Blackrock’s ETHA. A similar delay was announced for the NYSE American LCC’s proposal related to trading and listing options for Bitwise’s ETHW and both Grayscale’s ETHE and its Mini Trust variant on Ethereum.
The regulatory body has pushed its decision timeline to mid-November, earmarking November 10 for the Nasdaq ISE’s proposals and November 11 for those of the NYSE American LCC. This development trails the SEC’s recent nod to options trading for BlackRock’s iShares Bitcoin Trust (IBIT) on the Nasdaq, heralded by Bloomberg analyst Eric Balchunas as a “huge win” for spot BTC ETFs. This prior approval has sparked optimism that a similar sanction for Ether-based products could lucratively expand their attractiveness to larger investors, enhancing liquidity and investment inflow.
Ethereum’s market posture appears resilient in the weekly outlook, with the asset trading at $2,625, signaling a potential stabilization following its recent tumult. For avid followers of crypto markets and Ethereum specifically, the twists and turns of ETF inflows and outflows, along with regulatory developments, offer a thrilling saga of adversity, resilience, and perhaps, redemption.
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Featured Image from Unsplash.com, Chart from TradingView.com
