This column was co-written by Frank Chaparro, Special Projects Director at The Block, and Laura Vidiella of MNNC Group. The views expressed in this column are their own and do not necessarily reflect those of their employers.
The Ether ETF has launched. The market debut of the new fund tied to the second-largest cryptocurrency has seen trading volumes surpass $1 billion, which is about 23% of the volumes of the Bitcoin ETF on its first day of trading earlier this year. In terms of overall flow, Ether flows were about 16% of Bitcoin flows.
At this point, it is almost a cliché to say that the launch of a spot ETF fund for Ether is a truly historic moment for the asset, and represents further institutionalization of the asset. As I have often pointed out in this column, the god of flows can give or take away.
But today, as of this writing, there has been net outflow, primarily from Grayscale’s ETHE fund. Unsurprisingly, Ether is down today. As I’ve often mentioned in this column, funds often drive price movements. When the flow is bad, prices generally fall. Conversely, when the flow is good, Bitcoin has benefited, and Ether is likely to do the same. But remember, flow is only part of the story. Other factors, including political and macroeconomic influences, can also play a role.
Nonetheless, I would like to highlight what I discussed with Bitwise CEO Hunter Horsley: While the current flow trends for Ether and Bitcoin are similar, it is important to note that these assets are not identical. In the long run, as investors develop a more specific view of how these assets fit into their portfolios, their flow and liquidity profiles will change.
For now, it is easy to argue that both Bitcoin and Ether are risky assets that could invade the 60% allocation to stocks in a portfolio. However, their roles within a portfolio may differ. Bitcoin is often likened to digital gold, but Ethereum Ethereum
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It’s more of an open computer network on which a wide range of distributed applications can be built.
According to Horsley, while Bitcoin is a larger asset than Ethereum, investors don’t necessarily view Bitcoin as the big apple and Ethereum as the small apple.
“Bitcoin is an apple and Ethereum is a banana,” he said. “They’re both fruits, but they’re going to have slightly different journeys as a store of value versus a technology platform.”
Most ETFs only get a few hundred thousand dollars of trading volume on the first day. So compared to the average ETF, it’s historical. Compared to the Bitcoin ETF, it’s about 20% of the volume. That’s a significant amount, especially considering it’s summer and Ethereum’s market cap is only 30% of Bitcoin’s.
Finally, Horsley thinks hedge funds were light this time, and Grayscale refugees were light. There were definitely retail investors, and Bitwise saw several RIAs, family offices, and institutional buyers yesterday.
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