The underwhelming debut of more than half a dozen Ethereum futures exchange-traded funds (ETFs) this week has spooked analysts at K33 Research. So much so that they are calling for a “rotate back” into Bitcoin.
In a report published on October 3, K33 Research analysts suggested that it’s “time to pull the brakes on ETH and rotate back into BTC.” The bearish sentiments stemmed from the weaker-than-expected performance of the nine Ether futures ETFs launched this week—both in terms of price and value.
Lackluster debut of Ether Futures ETFs
Earlier this week, investment firms ProShares, VanEck, Bitwise, Valkyrie, Kelly, and Volshares reportedly launched Ethereum futures ETFs—based on the contracts to buy or sell ether futures at a specific date. However, the inaugural Ether futures ETFs underperformed on their first day of trading, attracting less than $2 million in flows.
According to some media reports, the first-day trading volume of six Ether Futures ETFs stood at $1.92 million, with ProShares Ether Strategy ETF accounting for 45.7% of the total volume at $878,560. By comparison, ProShares Bitcoin Strategy ETF (BITO) amassed a total trading volume of $1 billion within two days of its launch in 2021.
A user on platform X (formerly Twitter) pointed out that the initial trading volume of inaugural Ether Futures ETFs accounted for only 0.2% of the trading volume of Bitcoin futures ETFs upon its launch.
Analysts at K33 Research noted that Bitcoin futures ETFs launched when Bitcoin was near an all-time high, so no one expected the initial trading volume of Ether futures ETFs to “come “anywhere close” to that. According to them, the first-day numbers did not meet expectations and reflected a lack of institutional demand for Ether futures ETFs.
In their view, however, the launch of Ether futures products is a good omen for Bitcoin, as it has raised the odds of spot Bitcoin products getting approved as early as next year. The impending halving event, scheduled for April 2024, could also prove favorable for Bitcoin.
“The gravitational pull in crypto for the time being stays in BTC, with a promising event horizon down the line, still favoring aggressive accumulation.”
It’s still too early to rule out Ether ETFs
While the debut of Ether Futures ETFs was not as sanguine as speculators would have liked, Eric Balchunas, a senior ETF analyst at Bloomberg, said there is no need to panic. “Any crypto-related launch tends to be a ‘buy the rumor, sell the news’ event.”
At the time of writing, Ethereum was trading at $1635, down 0.69% from the previous day. Balchunas likened the slide in ether prices to a decline in the price of Bitcoin following the initial spike in demand of Bitcoin futures ETFs. He suggests that ether prices could follow a similar trajectory.
“If you look at BITO, Bitcoin went down a lot after that […] I wouldn’t be surprised if this happens with futures ETFs either.”
Notably, the U.S. Securities and Exchange Commission (SEC) is yet to approve Ethereum spot ETFs. The decision is unlikely to be made until the end of this year. The markets regulator has reportedly delayed its approval decision for ARK 21Shares Ethereum ETF and the VanEck Ethereum ETF—both of whom filed for a Ethereum spot ETF last month.
Meanwhile, following its court victory against the SEC, Grayscale Investments has also applied for an Ethereum spot ETF. Grayscale’s proposal outlines the intention to list and trade shares of the “Grayscale Ethereum Futures Trust ETF” on the New York Stock Exchange Arca.
