This week, investment managers Bitwise, Proshares, and VanEck all separately launched six futures-based ETFs, the first in the U.S., tied to ethereum, the world’s second most popular cryptocurrency. Grayscale Investments also asked the Securities and Exchange Commission to let it convert the Grayscale Ethereum Trust, the largest ethereum investment product in the world, to a spot ether ETF. The product has $5 billion in assets under management.
The launches come as the SEC continues to deliberate on the future of a spot bitcoin ETF. Over the last few years, the SEC has denied more than 30 spot bitcoin applications. The SEC also filed lawsuits against Coinbase and Binance, two of the world’s largest crypto exchanges, this year.
Even though the regulatory uncertainty has caused many advisors to stay away from crypto, investment vehicles like ETFs can provide a more secure and compliant way for advisors to gain exposure to bitcoin and Ethereum on behalf of their clients.
“What these ETFs do is they take those features and package them up into a ticker that’s accessible to everyday investors, to financial advisors in a brokerage account,” said Matt Hougan, CIO of Bitwise, during a webinar on Tuesday hosted by the Digital Assets Council of Financial Professionals. “Large institutional investors are not going to pull out their phone and download an app and put a billion dollars to work. They’re going to work in a regulated market.”
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Bitcoin and Ethereum are the only two cryptocurrencies that the SEC has specifically said were not a security.
Last year, a record $3.82 billion was lost to investment fraud, the bulk of which is tied to cryptocurrency-related scams, including the collapse of FTX and other high-profile crypto exchanges. Of that amount, $2.57 billion was lost specifically to cryptocurrency investment scams last year, according to an analysis done by investment fraud law firm Carlson Law.
“In the past, you really only had two options when you bought digital assets: either you left them on an exchange or custodian, taking counterparty risk, or you sent them to an offline wallet and self-custodied them,” Kyle DaCruz, director of digital asset products at VanEck said. “As we’ve seen over the last year, the space is still new and developing. And as with the blow-ups with FTX, perhaps if investors have the opportunity to get exposure to these assets through an ETF or ETF wrapper, they would not have maybe left as much on the exchanges.”
Trading volume of the new ETFs remained relatively low with less than $2 million in trading volumes across the six funds on the first day. Bloomberg analyst Eric Balchunas said on X, formerly known as Twitter, that Monday’s trading volumes were underwhelming but average for a normal ETF launch. In comparison, the first Bitcoin futures ETF was one of the most-traded ETF debuts, with $984 million in volume and $570 million in assets.
