Exchange-traded funds (ETFs) linked to the price of ether in the United States had a successful launch on Tuesday, with $1.07 billion worth of shares trading hands in the products, as reported by dealers, Bitwise Asset Management, and CF Benchmarks, a producer of digital asset indexes.

According to Bitwise, the most traded ETFs were the Fidelity Advantage Ether ETF ($137 million), the iShares Ethereum Trust ($245 million in trading), and Grayscale’s Ethereum Trust ($450 million in turnover).

On Tuesday, products from Invesco, VanEck, Bitwise, Franklin Templeton, and 21Shares also started trading.

The ether products represent another victory for the cryptocurrency industry’s drive to bring digital assets into the mainstream, after the introduction of nine U.S. spot bitcoin ETFs in January. However, experts predict that the products won’t attract the same amount of inflows.

The $4.6 billion that was exchanged in the bitcoin ETFs on their January launch was not exceeded by Tuesday’s trading volumes. As of Wednesday morning, information regarding ether ETF inflows will be accessible.

According to Grzegorz Drozdz, a market analyst at financial company Conotoxia Ltd., “ether ETFs represent an important step in the development of the cryptocurrency market, even though they may not attract as much inflow as bitcoin ETFs.”

According to CoinGecko, a cryptocurrency analytics company, the price of ether, the second-largest cryptocurrency in the world after bitcoin, trended lower on Tuesday, which also affected the pricing of the new ETFs. According to CoinGecko, ether was trading flat at $3,486.75 following market closing.

The launch of the ETFs, according to market participants, is important for the industry’s ongoing campaign to categorise ether as a commodity as opposed to a security.

Although the Securities and Exchange Commission has not declared ether to be a commodity, the new instruments are described as commodity-based trusts in registration documents.

Cristiano Ventricelli, senior analyst of digital assets at Moody’s Ratings, stated in a study on Tuesday that the launch increases the “legitimacy” of the cryptocurrency industry and that crypto ETFs would assist increase market stability and decrease volatility. 

The debut of the bitcoin ETF marked the end of a ten-year battle with the SEC, who had denied the products because of fears about market manipulation.

After losing a legal battle by digital asset management Greyscale Investments, the regulator was compelled to approve the ETFs, although cautioning that the products were very hazardous at the time of approval.

According to Morningstar Direct statistics, the products attracted $33.1 billion in net inflows as of June, making the launch one of the most successful in the history of the ETF industry.

Bitcoin ETF issuers engaged in fierce competition over costs, with many companies giving full charge waivers for a limited time.

According to their public offering documents, the fees for ether exchange-traded funds (ETFs) vary from 0.19% for Franklin Templeton’s ET fund to a maximum of 2.5% for Grayscale’s ET trust, which it is transforming into an ETF. The remaining group is around 0.25%.

In general, the costs are similar to those of bitcoin products; however, fewer exemptions are being offered by issuers.

With a 0.15% charge, Greyscale debuted a “mini” version of their ether ETF.

Although demand projections for the ether products are very different, Galaxy Research, whose sister business Galaxy Asset Management is in the process of launching an ether ETF with Invesco, has calculated that monthly inflows of $1 billion may be attracted.

In a letter, research analyst at Fineqia International Matteo Greco stated that the ether ETF market’s demand will be critical in determining investor interest in digital assets other than bitcoin.

The SEC’s decision to exclude the “staking” mechanism—a crucial element of the Ethereum blockchain that enables users to lock up their tokens for a certain amount of time in return for yield—from the ether ETFs is a significant source of concern for some investors. The SEC will only permit the ETFs to contain normal, unstaked ether as they are now designed.

September saw the start of issuer filings for the ether ETFs. Although executives were not optimistic that the SEC would accept the products, the agency shocked the industry in May by approving the necessary initial rule adjustments.

Gary Gensler, the chair of the SEC, told Reuters last month that the Greyscale case had affected his decision to approve the ether products since the underlying market conditions were comparable.

(Adapted from ThePrint.in)

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