Are Ethereum ETFs Already A Failure? Is A Comeback Around the Corner

Despite the highly anticipated launch of Ethereum ETFs in the United States, hopes of a significant boost to Ethereum price have remained unfulfilled as the cryptocurrency continues to underperform Bitcoin (BTC). But, is this a short term trend and is there a comeback around the corner?

Bitcoin Outperforms Ethereum Despite Ether ETFs

In a blog post on Monday, crypto research firm Kaiko analyzed this trend, highlighting what could have caused Ether’s weakness. Notably, last week marked the launch of six futures-based ETH ETFs on U.S. markets, following an earlier-than-expected approval by the U.S. Securities and Exchange Commission (SEC). However, these ETFs failed to generate significant trading volume or provide the anticipated boost to the overall crypto market.

According to Kaiko, among these newly launched ETFs by VanEck and ProShares, the two largest by trade volume struggled to achieve an average daily trade volume of just $0.5 million during their initial week of trading.

In contrast, the first Bitcoin futures ETF, ProShares Bitcoin Strategy (BITO), attracted more than $1 billion in trade volume on its debut day. The firm attributes the dull response to launch of Ethereum ETFs to the prevailing market conditions, marked by a September surge in risk-free rates driven by robust U.S. economic data and escalating macroeconomic uncertainties. These factors, it noted, have diminished interest in riskier assets such as cryptocurrencies.

Ethereum’s underperformance compared to the broader crypto market has also been evident since “the Merge” with the ETH/BTC price ratio and volume being on a downward trend over the past year.

“ETH’s underperformance is likely due to the ongoing impact of the bear market, which historically has seen traders turn to BTC, the oldest and largest crypto asset,” Kaiko wrote.

Additionally, despite the increase in open interest for ETH perpetual futures since early September, funding rates have also stayed neutral to negative, indicating a lack of clear market direction.

Are Institutions Buying Ether ETFs?

However, Kaiko noted that even though ETH futures ETFs did not attract significant trading volume, they still provide a liquid, cost-efficient, and transparent way for investors to gain exposure to Ethereum. This could potentially alter institutional investors’ perceptions of ETH, which currently remains strongly correlated with BTC, despite their conceptual differences.

Meanwhile, ETH extended its losses on Monday, after shedding approximately 7% over the past week to reach a trading price of $1,569. This contrasts BTC which was trading at $27,401 after losing   just 2.22% over the same period.