- VanEck to close Ethereum Futures ETF (EFUT) by September 16, 2024
- EFUT has had lower asset accumulation compared to VanEck’s spot Ethereum ETF.
- In general, Ethereum is struggling with competition, network revenue, and declining fees.
VanEck plans to close its Ethereum Strategy ETF (EFUT) by September 16, 2024, and liquidate it by September 23.
Launched in October 2023, EFUT has struggled with underperformance and underperformance compared to VanEck’s more successful spot Ethereum ETF (ETHV).
Strategic Rebalancing
VanEck’s move to close the EFUT ETF comes as part of a strategic review of its ETF offerings. Launched in October 2023, EFUT was designed to provide exposure to Ethereum futures, but had just $21 million in assets, a sharp contrast to the $63 million net inflows seen by the spot Ethereum ETF (ETHV).
The decision to liquidate EFUT is consistent with VanEck’s ongoing evaluation of factors including performance, liquidity and investor interest.
EFUT shareholders will receive a cash dividend based on the net asset value of their holdings after the ETF is closed and liquidated.
This change reflects VanEck’s broader strategy of focusing on more successful cryptocurrency-related products.
Challenges Facing Ethereum and Ethereum Futures ETFs
VanEck’s August 2024 Crypto Monthly Summary highlights several challenges that have contributed to the recent Ethereum price decline.
According to the VanEck report, Ethereum’s share of decentralized exchange trading volume is expected to drop significantly from 42% in 2022 to 29% in 2024.
The report attributes this decline to a number of factors, including a general decline in network revenue, intentional policy decisions, and competition from high-throughput blockchains like Solana, Sui, and Aptos. These competitors are driving speculative demand on Ethereum, exacerbating its price problems.
Additionally, Ethereum’s Layer 1 revenues have been impacted by competing Layer 2 networks, which led to a 99% drop in network fees following the Dencun upgrade in March 2024. This has increased competition within the Ethereum ecosystem and has spurred the proliferation of Layer 2 solutions. Some critics argue that the current number of Ethereum scaling solutions exceeds the demand.
VanEck’s decision to close EFUT while continuing to offer other cryptocurrency-related products, including a Digital Asset Mining ETF (DAM) and a Bitcoin Strategy ETF (XBTF), shows the firm’s continued involvement in digital assets despite the challenges facing Ethereum.