The launch of Spot Ethereum ETFs in the United States on July 23 did not result in a positive start for Grayscale, the world’s largest crypto asset manager. The newly converted Ethereum Trust (ETHE) experienced a significant loss of $484 million on the first day of trading. This trend is similar to what occurred when Grayscale converted its Bitcoin Trust to a spot ETF, where the fund lost half of its assets under management. This potential loss could amount to around $4.5 billion worth of Ethereum. Investors are withdrawing from the fund due to the opportunity to realize profits on the large premium gap that existed before the transition to spot-based trading.
In addition to the profit-taking behavior of investors, there is a shift towards funds with more favorable fees compared to ETHE’s high 2.5% fee. The competition in the market also plays a role, with seven other competing funds offering lower fees. To address this issue, Grayscale introduced the Ethereum Mini Trust (ETH) with a $1 billion AUM starter and a lower 0.15% fee. This new fund attracted an inflow of $15 million on its first day of trading, showing some investor interest.
Despite Grayscale’s challenges, the overall performance of the ETF industry was relatively positive. The nine ETF providers collectively received an inflow of $106 million on the first day. Bloomberg ETF analyst James Seyffart described it as a “very solid first day” in a post on X on July 24. BlackRock’s ETHA fund led the pack with $266.5 million in inflows, while the Bitwise ETHW spot ETF attracted $204 million. Fidelity’s FETH fund also saw a significant inflow of $71 million. Other providers such as 21 Shares, Invesco, VanEck, and Franklin received minor inflows ranging between $7.5 million and $13 million.
Market Response and Price Predictions
Despite the excitement surrounding the launch of spot Ethereum ETFs, there was no significant price pump in the Ethereum market. The asset reached an intraday high of $3,534 before dropping to just over $3,400. However, Ethereum did show some recovery, trading at $3,430 during the Wednesday morning Asian session. Analysts have mixed predictions on the future price of ETH, with some speculating that prices may fall below $3,000 in the short term after the ETFs launch, but will eventually reach a new all-time high as institutional investors embrace this newly accessible trading avenue.