The introduction of spot Ethereum ETFs in the United States marked a significant milestone in the world of crypto trading. On July 23rd, Grayscale’s Ethereum Trust (ETHE) was converted into an ETF, only to experience a substantial loss of $484 million on its first day of trading. This outcome paralleled the fate of Grayscale’s Bitcoin Trust when it transitioned to a spot ETF, leading to a potential loss of half of its assets under management, which could amount to approximately $4.5 billion in Ethereum.
The primary reason behind investors pulling out of the fund was the opportunity to realize profits from the large premium gap that existed prior to the conversion to a spot-based ETF. Additionally, investors showed interest in funds with more favorable fees, as ETHE imposed a hefty 2.5% fee, significantly higher than its competitors. In response to this, Grayscale launched an Ethereum Mini Trust (ETH) with a $1 billion AUM starter and a reduced fee of 0.15%. This move attracted an inflow of $15 million on its first trading day, as per preliminary data from Farside Investors.
Despite Grayscale’s challenges, the overall market for Ethereum ETFs showed promise on the debut day. The combined inflow for all nine ETF providers amounted to $106 million, with Bloomberg ETF analyst James Seyffart describing it as a “very solid first day.” BlackRock’s ETHA fund led the pack with $266.5 million in inflows, followed by Bitwise ETHW with $204 million and Fidelity FETH with $71 million. Other providers such as 21 Shares, Invesco, VanEck, and Franklin also saw minor inflows ranging from $7.5 million to $13 million on day one.
Market Reaction and Price Movement
Despite the launch of spot ETFs, Ethereum markets did not witness a significant pump as anticipated. The asset briefly touched an intraday high of $3,534 before retracing to slightly above $3,400. However, Ethereum managed to rebound during the Wednesday morning Asian trading session, settling at $3,430. Analysts have speculated that ETH prices might dip below $3,000 following the ETF debut but are optimistic that long-term growth will lead to a new all-time high, driven by institutional investors utilizing this new trading avenue.
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