Fight for assets begins as ETH futures ETFs debut

The first ETFs to hold ether futures contracts launched Monday, with fund groups like VanEck, ProShares, and Bitwise Asset Management competing for assets.

Volatility Shares, the firm that kickstarted the latest wave of filings for such products in July, no longer intends to launch an ether futures product, a person familiar with the firm’s plans told Blockworks.

The initial competitors

VanEck on Monday launched its Ethereum Strategy ETF (EFUT), which invests in standardized, cash-settled ETH futures contracts traded on exchanges registered with the Commodity Futures Trading Commission. The fund joins a bitcoin futures ETF the firm launched in 2021.

“While investors still do not have the means to gain exposure to digital assets here in the US via a spot ETF product, we’re very pleased to be launching EFUT as a means to access the robust futures market that has developed around ETH itself,” Kyle DaCruz, VanEck’s director of digital asset product, said in a statement.

Meanwhile, ProShares and Bitwise Asset Management launched multiple ether-related ETFs Monday.

Read more: SEC now ready to consider ETH futures ETFs, sources say — but what’s changed?

The ProShares Ether Strategy ETF (EETH) began trading on the New York Stock Exchange. The firm also brought to market the ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE) and its Bitcoin & Ether Market Cap Weight Strategy ETF (BETH).

The three funds join ProShares’ Bitcoin Strategy ETF (BITO) — the first bitcoin futures ETF to market in the US, which now has about $860 million assets under management.

Like ProShares, Bitwise is also offering investors choice in how they want to access exposure to ether futures. The company said in a Friday news release it intended to launch its Ethereum Strategy ETF (AETH) and Bitcoin and Ether Equal Weight Strategy ETF (BTOP) on Monday.

Competing crypto ETF issuer Valkyrie began adding ether futures contracts to its bitcoin futures ETF on Thursday as part of an investment strategy change set to go into effect on Oct. 3, a spokesperson told Blockworks Thursday. But the firm said in a Friday filing that it would “unwind” its positions in ether futures contracts until the investment strategy is officially amended.

Meanwhile, a source familiar with Volatility Shares’ plans said the company chose to ditch its ether futures ETF plan due to losing its potential “first-mover advantage.” Such an advantage is critical for smaller issuers going up against rivals with bigger marketing budgets, the person added.

Read more: Volatility Shares not giving up on ETH futures ETF effort

Volatility Shares was in position to potentially launch the first fund with pure exposure on Oct. 12. But ether futures ETFs were able to come to market ahead of schedule as the US Securities and Exchange Commission appeared to accelerate such launches to prepare for a potential government shutdown.

The regulator did not return a request for comment.

VolatilityShares is not the only firm to abandon its ether futures ETF plans.

Roundhill Investments requested to withdraw its application for such a fund in a Sept. 29 filing to the SEC.

Kelly ETFs founder Kevin Kelly told Blockworks in an email Monday the firm is not launching its proposed ether futures ETF.

Products look to stand out

Nate Geraci, president of The ETF Store, said in August he expects the demand for ether futures ETFs to be “fairly limited overall.”

I expect demand for ETH futures ETFs to be fairly limited overall…

BTC futures ETFs have < $1.5bil AUM & much of that came in first few days post-launch.

Combined BTC + ETH futures ETFs prob best path to succeed for now IMO.

Ultimately, investors want real deal (spot ETFs). https://t.co/hNx61wmYbz

— Nate Geraci (@NateGeraci) August 3, 2023

Bloomberg Intelligence’s Eric Balchunas said in a Friday X post he estimates all ether futures ETFs to have about $200 million in assets under management by the end of the first week of trading.

BITO quickly amassed $1 billion in assets when it launched ahead of competitors in October 2021. But with a more crowded field of ether futures ETF issuers launching at or around the same time, industry watchers have said marketing and fees will be key.

VanEck’s product carries an expense ratio of 66 basis points. The Bitwise funds charge 85 basis points, while the ProShares offerings cost 95 basis points.

As for marketing, VanEck had been teasing the upcoming launch of EFUT last week, posting a video on its X page Thursday inviting investors to “enter the ether.”

“As we’ve been saying both with ETH futures, but especially with spot bitcoin, it will be a marketing war like we’ve never seen since they all do [the] same thing and launch on [the] same day,” Balchunas said in an X post in response to the VanEck video. “Unprecedented.”

VanEck added in a Friday X post that it plans to donate 10% of its profits from EFUT to Protocol Guild — a collective of 152 Ethereum core protocol contributors.

“Marketing war has definitely begun,” Bloomberg Intelligence analyst James Seyffart said in response to the announcement on X.

Friday night fun. 10% of Vaneck’s profits on their Ethereum ETF $EFUT are gonna go to @ProtocolGuild which is an org made up of ETH core developers. So basically going back into the ETH ecosystem in a way. Marketing war has definitely begun https://t.co/mCruFnOdap

— James Seyffart (@JSeyff) September 29, 2023

ProShares highlighted in a Friday news release that it is the issuer of BITO, the largest crypto-linked ETF. It has also touted the greater optionality it is offering compared to VanEck and Bitwise with its three ether-related funds.

“We believe that BETE and BETH are groundbreaking in that they offer investors the opportunity to target the performance of the two leading cryptocurrencies in their brokerage accounts through one transaction with a single ticker,” CEO Michael Sapir said in a statement. “We are offering two weightings depending on an investor’s desired exposure.”

Bitwise CIO Matthew Hougan said the difference between his firm and the other initial issuers of ether futures ETFs is the level of crypto expertise.

“We’re excited to see big traditional equity assets managers come into the market; it’s a great validation of the space,” Hougan told Blockworks in an email. “For investors, the difference with Bitwise is that crypto is all that we do.”

Read more: New Bitwise research seeks to fill gaps in rival bitcoin ETF proposals

VanEck and ProShares have 67 and 137 ETFs trading in the US, respectively, according to ETF.com — funds across an array of asset classes.

“Every day at Bitwise, 64 investment professionals show up to work and all we do is study crypto,” Hougan added. “We have the builders, regulators, technologists, venture capitalists and entrepreneurs on speed dial.”

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