Ether ETFs - Driving Institutional Interest

There’s been a lot of talk about a Bitcoin ETF, including from us, but it would be a huge mistake to not keep a close eye on Ether.?

Capping a years-long battle by firms to provide investment vehicles centered on the second-largest digital token, Ether futures-based ETFs began trading in the U.S. this week, with ProShares, VanEck, and Bitwise among the firms launching funds. Even Grayscale Investments on Monday filed for approval to convert the Grayscale Ethereum Trust (ETHE) to a spot Ethereum exchange-traded fund (ETF). Its Ethereum trust is the largest Ether investment product in the world, with almost $5 billion in assets under management.

The debuts come almost exactly two years after Bitcoin-futures ETFs premiered in the U.S. to much fanfare and a rapid gathering of assets for the first such product, the ProShares Bitcoin Strategy ETF (ticker BITO). Of course, that launch happened at the height of the crypto boom, when Bitcoin was trading above $60,000.?

Until now, the SEC had not permitted any spot Bitcoin exchange traded funds, regulators being hesitant to give a green-light to these types of crypto-centric products. As recently as earlier this year, some companies had rescinded their applications for such a product. Fast forward to today, and issuers are clamoring to get their products out.?

With this news, let’s take a look at what blockchain data would be saying about trends heading into it as well. Let’s dive into a few notable highlights.?

Coinbase Balance

We can all easily look at a graph charting the price of Ether over the past month, but what about balances at various exchanges? This can be even more telling as we try to figure out who and what types of traders are bullish and bearish.?

Take a look at one of the most popular exchanges, Coinbase, for instance. Its ETH balance declined by 38% over the past month, while its BTC balance barely changed. One possible explanation is large scale accumulation of ETH, with buyers choosing to withdraw their new ETH holdings from Coinbase to reduce the counterparty risk.

Institutional Demand

Taking an even deeper look, who was buying and selling? Tracking where those Coinbase ETH outflows went gives us an idea. Turns out, up to 40% went to Coinbase Prime, indicating likely institutional buying. This suggests that institutional investors are increasingly interested in Ethereum. The previous crypto cycle was all about the institutional adoption of Bitcoin. However, given the current trend, it is possible that Ethereum will lead institutional adoption in the next crypto cycle.?

Smaller Investors

The first day of trading seemed to show that the retail investors were less interested than institutions. Most of the futures-based Ether ETFs that were launched on Monday ended the day in the red and data shows that the seven funds combined had less than $7 million in trading volume. This might be in part due to the fact that so many funds launched at the same time, and there’s only so much demand to go around.?