Cryptoverse: Winter is coming as ether funds flounder in fall

Oct. 17 (Reuters) – Weak crypto markets wobble into fall. And winter is approaching.

At a time when investors are fleeing risk amid economic downturn and wars in Ukraine and the Middle East, the launch of a long-anticipated U.S. exchange-traded fund group to track Ether is a new sign of a recession. It became proof.

Six ETFs offering exposure to Ether futures contracts were launched on October 2 and raised just under $10 million in the first week of trading, according to CoinShares data. Ethereum products overall experienced $7.5 million in outflows in the week ending October 13, according to the data.

“The timing for a futures ETF could not be worse,” said Vettle Runde, senior analyst at K33 Research.

U.S. Treasury yields rose to multi-decade highs during the week of October 2, as investors pulled money out of riskier assets in the face of a “prolonged period of high interest rates.”

Ether prices have fallen more than 5% so far this month, reducing the size of the cryptocurrency market from $1.15 trillion to $1.12 trillion, according to CoinGecko.

According to K33 Research, the Ether futures ETF had less than $2 million in volume on its first day. In contrast, the ProShares Bitcoin Strategy ETF (BITO.P), the first fund to track Bitcoin futures, had approximately $570 million in inflows on its first day of trading in October 2021. .

Contrast this with ETFs launched at the height of the crypto boom in 2021, and how institutional investors, who were driving much of the demand at the time, retreated from digital assets as the macro picture became increasingly uncertain. It shows.

Cryptocurrency ETFs have seen a slowdown in activity in recent months, with Lunde noting that from August 1st to October 3rd, there were net outflows of 11,157 Bitcoins from Bitcoin ETFs worldwide. These funds are preferred by many traditional investors because they are easily accessible via regular stock exchanges. There is no need to hold cryptocurrencies directly.

Ben McMillan, chief investment officer at IDX Digital Assets, said the firm is positioning its investments more defensively until there is more clarity on Federal Reserve policy and the possibility of a recession.

“Investors are looking at ways to make their portfolios more defensive,” McMillan added. “Speculative assets are now a much lower priority, even if there is a compelling growth argument.”

Will you return to Bitcoin?

Bitcoin’s status as the original “digital gold” has provided some support for the currency, which has lost about 2% this month, outpacing Ethereum. Bitcoin-focused ETFs saw $43 million in inflows during the week of October 2nd, pushing Bitcoin’s share of crypto market cap to 48% from 47%.

Ether’s price has risen 32% this year, lagging behind Bitcoin, which has risen more than 70%.

ProShares (EETH.P), VanEck, and Bitwise (AETH.P), newly launched ETFs that track only Ether futures on the Chicago Mercantile Exchange, have all fallen more than 6% since their launch.

ProShares and Bitwise also launched funds that combine Bitcoin and Ether futures, while Valkyrie Funds converted a pure-trading Bitcoin ETF into an ETF with exposure to both Bitcoin and Ether (BTF). O). These dual-exposure funds performed better, with Bitwise and ProShares down about 3% and Valkyrie up 0.3%.

IDX’s McMillan said that while there has been a lackluster response to the Ether futures ETF, factors such as the use of the Ethereum blockchain in tokenizing assets by large financial companies could bring investors back to the table. .

“Right now, the macro context rules everything.”

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