Ethereum ETF Update: Four Funds' Performance and Grayscale ETHE Premium Returns to Positive

As the clock struck midnight, the first half of 2021 for cryptocurrency came to a close. The top two crypto assets achieved year-to-date gains of 18.81% and 185.75% respectively in the first half of the year.

Looking back at the first half, besides major institutions announcing allocations to Bitcoin , Ethereum, and other crypto assets, another significant event was the successful launch of the world's first Bitcoin ETF in Canada. Coincidentally, many analysts believe the most important event of the second half could also be an ETF, as the United States is expected to approve Bitcoin ETFs in the second half after rejecting them for eight consecutive years.

In our article "Understanding the Global State of Bitcoin ETFs: When Does the SEC's Delay Strategy End?" , we mentioned that three important Bitcoin ETF applications will expire by the end of December 2021. At that time, the SEC will be unable to delay further and must provide a definitive decision on approval or rejection, which largely determines whether the market will see a Bitcoin ETF approved in the US in 2021.

In fact, while the market focuses on Bitcoin ETFs, Ethereum ETFs are also rapidly developing. Just two months after the world's first Bitcoin ETF successfully launched on the Toronto Stock Exchange, Canadian securities regulators approved three Ethereum ETFs at once. OK Link data shows that as of this writing, there are currently 12 Ethereum ETFs or other Ethereum securities products globally, holding a total of 1.3894 million Ethereum worth approximately $3.086 billion.

Some have pointed out that the approval of Bitcoin ETFs directly drove the approval of Ethereum ETFs. Therefore, if the SEC approves Bitcoin ETFs, Ethereum ETFs will likely launch shortly after. This is also why several companies waiting for SEC approval of Bitcoin ETFs have also applied for Ethereum ETFs. Additionally, the Grayscale Ethereum Trust has returned to positive premium after 25 days of continuous negative premium.

Canadian Ethereum ETFs Launch in Bunch, Total Value Surpasses $450 Million

On February 18, the world's first Bitcoin ETF officially launched on the Toronto Stock Exchange in Canada. Purpose Investments, as the first investment company approved to launch a Bitcoin ETF, gained a significant advantage according to Bloomberg ETF expert James Seyffart.

Just two months later, on April 17, Canadian regulators simultaneously approved three Ethereum ETFs: Purpose Investments' Ethereum ETF (ETHH), Evolve Capital Group's Ethereum ETF (ETHR), and CI Global Capital Management's Ethereum ETF (ETHX), all of which launched on April 20.

According to the three companies' websites, management fees for the three Ethereum ETFs vary slightly. CI Global's management fee is 0.4%, Evolve's is 0.75%, while Purpose Investments charges 1%. On the first day of trading, Purpose Ethereum ETF attracted $26.46 million CAD (approximately $21.32 million) in funds, Evolve's ETHR raised $2.22 million CAD (approximately $1.79 million), and CI Global's ETHX had assets of $2.25 million CAD (approximately $1.81 million).

Three days later, on April 23, Canada's fourth Ethereum ETF began trading on the Toronto Stock Exchange. This was jointly launched by Canadian digital asset management company 3iQ and investment company CoinShares, offering both CAD (ETHQ) and USD (ETHQ.U) classes for trading .

From OK Link's newly launched "On-Chain Master" data dashboard, we can understand changes in holdings and accumulation increases for these four major Ethereum ETFs. The chart below shows that Purpose Ethereum ETF is in a state of continuous accumulation, growing from 19,590.32 Ethereum on April 30 to 59,837.29 Ethereum on June 30, representing a 205% increase in holdings over two months.

Purpose ETH ETF Holdings

However, due to the decline in Ethereum price, the peak value of this Ethereum ETF's holdings was reached on May 14 at $158 million, recently gradually declining to $127 million, a contraction of 20%.

Purpose ETH ETF Holdings

From April 30 to June 30, CI Galaxy Ethereum ETF added 25,874.14 Ethereum, growing by 162%. Its current total assets under management stand at $89.0738 million. Like Purpose Ethereum ETF, Galaxy Ethereum ETF's holdings value peak also occurred on May 14 at $130 million.

CI Galaxy ETH ETF Holdings

Evolve's holdings trend is similar to the first two Ethereum ETFs, with its holdings growing rapidly over the past two months from 4,997.26 Ethereum on April 30 to 14,794.69 on June 30, an increase of 196%. Evolve Ethereum ETF's holdings value peak appeared on May 17, reaching $5.3555 million, while the fund's holdings value has now fallen back to $4.0799 million.

Evolve ETF Holdings

Although 3iQ CoinShares Ethereum ETF launched 3 days later than the first three, it has become the largest Ethereum ETF by scale to date. Notably, during May 12-14, the fund grew significantly, with holdings increasing from 4,104.21 Ethereum to 78,821.38 Ethereum, adding 74,717.17 Ethereum. As of June 30, this Ethereum ETF held 82,065.86 Ethereum worth approximately $175 million.

3iQ CoinShares ETH ETF Holdings

According to OK Link data, as of July 1, these four Ethereum ETFs held 198,500 Ethereum in total, with a total value reaching $457 million.

Products

Also as of July 1, the four Bitcoin ETFs listed in Canada held 47,421.32 Bitcoin , reaching a value of $1.647 billion. The total scale of Ethereum ETFs is approximately 28% of Bitcoin ETFs.

Products

Before this, no one could have imagined that Canada would become the first country to launch Bitcoin ETFs, and the same applies to Ethereum ETFs. However, launching 8 compliant crypto asset ETFs in 2 months has indeed placed Canada at the forefront of North America and even the world in cryptocurrency exploration.

Three US Companies Simultaneously Apply for Ethereum ETFs, Grayscale ETHE Premium Returns to Positive

Meanwhile, in Canada's neighbor the United States, Bitcoin ETF applicants are still patiently awaiting SEC review. Perhaps having seen the symbiotic relationship between Bitcoin and Ethereum financial products in past history—such as CME launching Ethereum futures more than 3 years after Bitcoin futures, Canada launching Ethereum ETFs 2 months after Bitcoin ETFs, and the SEC's legal counsel in the Ripple case noting that XRP differs from Bitcoin and Ethereum—three companies applying for Bitcoin ETFs have also simultaneously applied for Ethereum ETFs.

The first to apply was VanEck. On May 8, it submitted a preliminary prospectus for an Ethereum ETF to the US SEC. VanEck plans to offer the product in cooperation with Cboe BZX. This company's Bitcoin ETF application is also first on the SEC's review list, with the SEC required to give a final response by November 14 at the latest.

On May 27, WisdomTree applied to the SEC to launch an Ethereum ETF. This Ethereum ETF also plans to list on the Cboe BZX Exchange, though the application documents do not yet list a crypto asset custodian.

Registration Statement

Just yesterday, SkyBridge Capital founder Anthony Scaramucci stated that on July 1, a private Ethereum foundation would be launched, followed by applying for an Ethereum ETF.

As is well known, the launch of Ethereum ETFs mainly has the following 5 significances. First, it provides a compliant investment channel for institutional investors and retail investors, accelerating the process of cryptocurrency compliance. Second, it attracts traditional industry investors to select crypto assets with advantages of low unit price, low trading threshold, low management costs, low risk, and high safety, expanding the cryptocurrency investment population. Third, the process of regulators screening and evaluating which crypto assets are suitable for ETFs also helps the cryptocurrency market with survival of the fittest, giving truly quality assets more opportunities and building more complete financial investment channels. Fourth, Ethereum ETF has low correlation with other asset classes, thus providing potential diversification returns and meeting investors' needs for financial product richness and diversification. Finally, although there may not be significant impact on Ethereum assets in the short term, the launch of ETFs opens the door for traditional funds to enter the cryptocurrency world, expanding demand and forming long-term stimulus for Ethereum prices. As the world's largest economy and one of the most active countries in crypto asset trading, if the United States can approve Bitcoin and Ethereum ETFs, the significance for the cryptocurrency world would naturally be even greater.

In our article "Why the Cryptocurrency Market Expects Bitcoin ETFs" , we mentioned the world's largest gold ETF—SPDR GOLD Trust. This gold ETF managed by the World Gold Trust Services and State Street Global Advisors, since listing on the New York Stock Exchange in November 2004, has begun a 7-year unilateral uptrend.

Currently, this ETF ranks 221st among global assets on Asset Dash, with a market capitalization of $59.351 billion. In comparison, the total assets of the four Bitcoin ETFs are $1.647 billion, less than 2.78%, while the four Ethereum ETFs represent an even smaller proportion at just 0.77%.

This scene inevitably reminds us of the relationship between Bitcoin, Ethereum, and gold market capitalization many years ago. In March 2018, gold's total market capitalization was $8.20 trillion, Bitcoin's total market capitalization was $185.01 billion, and Ethereum's total market capitalization was $83.667 billion. Bitcoin and Ethereum's total market capitalizations were 2.26% and 1.02% of gold respectively. By July 1, 2021, gold's total market capitalization was $11.27 trillion, while Bitcoin and Ethereum's total market capitalizations were $627.681 billion and $248.027 billion respectively, reaching 5.57% and 2.20%. Previously, when Bitcoin was at high levels, its total market capitalization even exceeded one-tenth of gold, so we can foresee the broad prospects for Bitcoin ETF and Ethereum ETF development.

Beyond Ethereum ETFs, Grayscale's Ethereum Trust ETHE is also considered one of the indicators for judging institutional acceptance of Ethereum. Currently, Grayscale ETHE holds 3.154 million Ethereum, with assets under management reaching $6.8 billion.

Looking at the chart below, ETHE entered a rapid accumulation phase starting February 1, quickly increasing from 2.9307 million to 3.1775 million by March 1, adding 246,800 in one month. Based on the 6-month lock-up period rule, there should be significant Ethereum unlocking during August-September. Recently, Grayscale ETHE has not increased holdings, perhaps considering transformation due to negative premium and the emergence of ETF competitors.

Ethereum: Grayscale Holdings

After 25 days of negative premium, Grayscale Ethereum Trust's premium has finally returned above water, closing at 2.14% as of June 30.

Ethereum: Grayscale Premium

Currently, although cryptocurrency market trends are somewhat sluggish, its financial products are still developing methodically. With the beginning of the second half of the year, we also look forward to more good news.

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