Ether futures ETFs fail to impress: K33 advises rotating back to bitcoin

The much-anticipated launch of ether futures-based ETFs turned out to be something of a damp squib, registering just 0.2% of the trading volume seen when bitcoin futures ETFs debuted in 2021. 

“We believe it’s time to pull the breaks on ETH and rotate back into BTC,” K33 Research Senior Analyst Vetle Lunde and Vice President Anders Helseth noted in their latest report. “We no longer see a strong bull case for ETH/BTC in the short term.”

Ether futures ETFs from firms like VanEck, ProShares and Bitwise went live on Monday, almost two years after the first bitcoin futures ETF, offering investors exposure to the assets without needing a crypto custodian, exchange account or wallet.

VanEck launched its Ethereum Strategy ETF and ProShares, which launched the first bitcoin futures ETF, introduced its ProShares Ether Strategy ETF and two blended bitcoin and ether funds. Bitwise launched two ether futures ETFs: the Bitwise Ethereum Strategy ETF and the Bitwise Bitcoin and Ether Equal Weight Strategy ETF.

While the bitcoin futures ETFs had the advantage of launching during a peak bull market, the ether ETFs’ performance was still unexpectedly weak, the analysts said, registering just $8.5 million in post-launch day assets under management, compared to bitcoin’s $576.5 million.

Post-launch day AUM. Image: K33 Research.

Post-launch day AUM. Image: K33 Research.

Ether and combo futures ETFs day one trading volume. Image: K33 Research.

Ether and combo futures ETFs day one trading volume. Image: K33 Research.

CME traders left wanting with no institutional appetite

CME traders tried to front-run the ether futures ETFs launch, expecting a stronger debut than transpired, Lunde and Helseth wrote. Ether futures premiums had increased dramatically ahead of the launch but quickly retraced following the underwhelming results, unable to reverse the year-long declining trend in ether versus bitcoin, the analysts noted last week.

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Providing institutional investors with easier access to crypto doesn’t guarantee immediate interest when there is simply not enough demand. The scenario mirrors the 2017 launch of bitcoin futures on CME, according to Lunde and Helseth, which took years to gain traction among institutional investors, unlike the rapid success of bitcoin futures ETFs in 2021.

However, K33 remains optimistic about the long-term implications for ether. “The floodgates have been opened, and although there was no liquidity waiting on the other side, this may change fast when the broader market sentiment eventually turns,” they wrote.

Crypto market on the rise, for now

Despite the underwhelming ether futures ETFs launch, bitcoin and ether both saw a rise of approximately 5% over the past week, though prices were up nearer 10% before the ETF launches. Rounding out the top three by market cap, BNB rose by 2% in the last week.

Top three market cap performance. Image: K33 Research.

Top three market cap performance. Image: K33 Research.

The market remains divided in its outlook, however, according to the analysts, with more chop in October likely. While offshore below-neutral funding rates suggest a bearish sentiment among crypto futures traders, options prices lean bullish, indicating a higher demand for calls over puts, they said.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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