Underwhelming Market Response to ETH Futures ETFs in the US
David Duong, the Head of Coinbase Research, recently discussed the disappointing market reaction to the newly launched ETH futures ETFs in the United States. According to Duong, these ETFs did not generate the same level of excitement and trading volume as the first BTC futures ETF, ProShares’ BITO, which debuted in October 2021.
Trading Volumes and Fund Flows
Duong pointed out that the top ETH futures ETFs collectively saw less than $1.5 million in trading volume on their first day. In contrast, BITO experienced over $1 billion in trading volume on its inaugural day. Additionally, the net inflow into these ETH futures ETFs was less than 2% of what BITO attracted.
Factors Contributing to the Disparity, According to Duong
- Market Timing: Duong observed that BITO had the advantage of launching during the 2021 crypto bull market, while the ETH futures ETFs were introduced at a later market cycle.
- Investment Advisor Familiarity: Investment advisors are generally more comfortable with Bitcoin and its alignment with their clients’ portfolios. Ether is perceived as more intricate and less understood within the investment community.
- Legal Developments: A recent court ruling labeling ETH as a crypto commodity may have fueled expectations for an ETH spot ETF, reducing enthusiasm for ETH futures ETFs.
- Market Movements: Large transactions funneling substantial amounts of ETH into exchange wallets may have contributed to Ether’s downward price movement. Duong believes Ether was more negatively impacted compared to Bitcoin.
Broader Market Concerns
Duong also highlighted concerns about the impact of rising long-end US Treasury yields on long-duration assets like equities and cryptocurrencies. The volatile nature of these yields is causing worry, rather than their absolute levels.
BTC and US Equities
According to Duong, the correlation between BTC returns and U.S. equity returns has been gradually increasing. Since mid-September, this correlation has moved from 0.16 to 0.32. The anticipation of spot Bitcoin ETFs in Q4 2023 is currently providing a safety net for BTC prices.
Regulatory Developments
Duong concluded by mentioning that crypto-friendly regulatory news, such as the court’s rejection of the SEC’s appeal in the Ripple case, is supporting BTC prices. However, he cautioned that there is still a non-zero risk of increased short-term volatility for digital assets, which could also impact equities.
Hot Take: ETH Futures ETFs Struggle in Comparison to BTC Futures ETF
The newly launched ETH futures ETFs in the US have failed to generate the same level of excitement and trading volume as their BTC counterpart. David Duong, Head of Coinbase Research, identified several factors contributing to this disparity. Market timing, investment advisor familiarity, legal developments, and market movements all played a role in the underwhelming performance of ETH futures ETFs. Additionally, concerns about rising long-end US Treasury yields and their impact on long-duration assets like equities and cryptocurrencies added to market worries. On the other hand, Duong noted that BTC’s correlation with US equities has been increasing and anticipates spot Bitcoin ETFs providing stability for BTC prices. Despite positive regulatory news supporting BTC prices, there remains a non-zero risk of increased short-term volatility for digital assets.
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