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Ethereum ETF launch fizzles as traders ‘distracted’ by SBF trial

Ethereum ETF launch fizzles as traders ‘distracted’ by SBF trial
Ethereum ETFs have gotten off to a slow start, and QCP Capital says this may have weighed on the market. Credit: John Angelillo/UPI/Shutterstock
  • Ethereum futures ETFs traded roughly 0.2% of Bitcoin ETF volumes in 2021.
  • The contrasting fortunes of the launches reflect the lower market activity at present versus two years ago.
  • FTX co-founder Sam Bankman-Fried’s trial has likely stolen focus too, QCP Capital said.

Happy Thursday!

Ethereum futures exchange-traded funds have failed to take off since launching on October 2. The slow start contrasts with that of Bitcoin futures ETFs.

Let’s get into it!

Slow and steady

Bitcoin and Ethereum have underperformed expectations this month, crypto market maker QCP Capital said on Thursday.

The slump has continued “unabated” since the beginning of October, the firm said in a market update. Crypto has failed to track a bounce in broader macro markets since last week’s US jobs data.

“This bout of weakness is particularly stark as it comes against a backdrop of supposedly bullish factors,” the market maker said.

In particular, October is the “strongest” month of the year. Bitcoin has only had one negative return in October since 2014, according to Coinglass data.

“We attribute a large part of why this has happened to the shocking disappointment of the Ethereum ETF, which has only traded roughly 0.2% of the corresponding Bitcoin ETF volume two years ago,” QCP Capital said.

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In 2021, Bitcoin futures ETFs — which track the future price of the asset rather than the current price — clocked up over $1 billion in trading volume in just two days after launching. ProShares’ BITO generated $200 million in the first 15 minutes, as it launched at the peak of the crypto market when Bitcoin was trading around $60,000.

About 90% of Ethereum futures ETF volumes is concentrated on VanEck and ProShares products.

Investors likely “felt institutions were on the verge of massive Ethereum adoption,” the firm said, adding that “it reflects more the scepticism towards futures ETFs in the space now.”

“Or perhaps crypto traders are too distracted right now listening to soundbites from SBF’s ongoing trial,” the firm said.

US inflation date today could make matters worse QCP Capital said, which, since Covid, “has generally produced upside surprises relative to expectations for this month’s release.”

“Hopefully the relative underperformance of Bitcoin and Ethereum to the upside now also mean their beta is lower to the downside as well, should CPI come in stronger than expected,” QCP Capital said prior to today’s US inflation report.

Beta measures market volatility. Basically, since upward volatility is low, downward price swings might also be less likely, the firm said.

US inflation increased by 3.7% year-on-year in September, marginally higher than estimates of 3.6% from Wall Street analysts. Core inflation, which excludes food and energy, was 4.1%, and 0.3% month-on-month, according to the Bureau of Labor Statistics.

Crypto market movers

  • Bitcoin whipsawed following the release US inflation data for September. The leading cryptocurrency dipped to around $26,600 after inflation came in above estimates. It quickly bounced back to trade above $26,800, down 1.2% over the past day.
  • Ethereum also lost 1.4%, down to $1,550.

What we’re reading

Adam Morgan McCarthy is DL News’ London-based Markets Correspondent. Got a tip? Reach out at adam@dlnews.com.