Review of the first day of Ethereum ETF launch: Grayscale ETHE net outflow exceeded US$480 million, Bitwise ETHW net inflow exceeded US$200 million

Original title: "ETHW's debut attracted more than $200 million. What is the strategy of the "first player" Bitwise in the battle of crypto ETFs?"

Original author: Nancy, PANews

 

Ethereum's tenth anniversary has ushered in a milestone. Nine spot ETFs have finally been approved. Eight issuers have won the victory of mainstreaming Ethereum after years of regulatory resistance. On the first day of listing on July 23, the trading volume of Ethereum spot ETF exceeded $1 billion, which is 23% of the $4.6 billion trading volume of Bitcoin spot ETF on the first day in January this year.

 

Although the increase in market demand will drive the rise of crypto ETFs, the competition between homogeneous products will inevitably be fierce, which has been reflected in the market structure of Bitcoin spot ETF. Among these issuers, Bitwise, a crypto-native institution, does not have the appeal of traditional giants such as BlackRock and Fidelity, but the scale of its crypto ETF funds is still considerable, and the "tactics" behind it are worthy of attention.

 

Bitwise is one of the well-known crypto index fund management companies in the United States. It launched its first crypto index fund in 2017 and now offers 20 products, covering ETFs, publicly traded trusts, private equity funds, hedge funds and NFT collections.

 

ETHW's debut on the market attracted more than $200 million, and BITB received more than 110 holding institutions

 

The recovery and prosperity of the crypto market is the premise for the development of ETFs. Since the beginning of this year, the approval of the Bitcoin spot ETF, the US election, and the Federal Reserve's interest rate cuts are driving a V-shaped reversal in the crypto market. As a channel for old money, these ETFs have also become one of the first beneficiaries and have ushered in a strong growth momentum.

 

Last night, the Ethereum spot ETF made its debut, with a cumulative trading volume of over $1 billion on the first day, mainly from Grayscale ETHE, BlackRock ETHA and Fidelity FETH. However, according to Farside Investors data, the Ethereum spot ETF was in a state of capital outflow on the day of listing. Grayscale ETHE brought in a net outflow of over $480 million, but Bitwise's ETHW became the main "money-attracting" force with a net inflow of over $200 million, far exceeding Fidelity FETH's $71.3 million and Franklin EZET's $13.2 million.

 

 

At the same time, Bitwise's Bitcoin spot ETF also performed well. SoSoValue data shows that as of July 22, the total net asset size of US Bitcoin spot ETFs has reached tens of billions of dollars in half a year, reaching 62.14 billion US dollars. Although the current Bitcoin spot ETF market has a significant head effect, from the perspective of capital trends, Bitwise's Bitcoin spot ETF BITB is also an investment target favored by investors.

 

SoSoValue data shows that as of July 22, BITB's cumulative net inflow reached US$2.2 billion, ranking fifth, exceeding the sum of the inflows of the six Bitcoin ETFs ranked behind, and has opened up a considerable distance from these ETFs. At the same time, BITB's total net asset value reached US$2.72 billion, ranking fifth among the 11 US Bitcoin ETFs, with a market share of 4.5%. Although the overall market share is still not comparable to that of top ETFs such as BlackRock and Grayscale, according to Dune data, BITB's weekly funds are basically dominated by net inflows, with only a few outflows.

 

 

And from the perspective of price performance, since its launch, the price of BITB has risen by nearly 45.7% to US$37.2. According to Fintel data, as of July 23, there were 117 listed companies that reported holding BITB, holding a total of approximately 1,067 shares of BITB, currently worth more than $390 million.

 

Fintel statistics show that BITB's holders include investment advisory firm Pine Ridge Advisers, large U.S. market maker Jane Street Capital, hedge fund management company Boothbay Fund Management, overseas hedge fund giant Millennium Management and options trading giant Susquehanna International Group. Bitwise CEO Hunter Horsley recently disclosed that a large bank in the United States has 20% of all its wealth management branches (hundreds) own Bitwise ETFs.

 

For a crypto-native asset management company without a deep traditional financial background, Bitwise has made a beautiful start. The Bitwise Asset Management team consists of more than 60 professionals with backgrounds in BlackRock, Millennium, Blackstone, ETF.com, Meta, Google, and the U.S. Attorney's Office. Among them, Bitwise CEO Hunter Horsley was a product manager at Facebook and Instagram and graduated from the Wharton School of the University of Pennsylvania. Bitwise has received multiple rounds of financing, and investors include Elad Gi, Electric Capital, Bridgewater CEO David McCormick, Blackstone executive Nadeem Meghji, Vetamer Capital, ParaFi Capital, and Coinbase Ventures.

 

The three major ETFs compete, Bitwise is highly optimistic about crypto assets

 

Fighting for the first launch, speed of volume, fee reduction, fee exemption... All issuers are secretly competing for "snatching a position".

 

In order to gain greater scale and liquidity in the hands of many competitors, Bitwise has made a fuss about the issuance time, transaction fees and ecological support.

 

The early bird catches the worm, which is the clear first-mover effect of the ETF business. As the first batch of approved Bitcoin spot ETFs, Bitwise submitted the relevant application as early as October 2021, and was finally approved in January this year after repeated rejections by the SEC; in the application for Ethereum spot ETF, although Bitwise applied later than other competitors, it is still a "starter", and Bitwise is also the first issuer to disclose that the Ethereum spot ETF seed fund is US$2.5 million.

 

At the same time, in order not to fall behind in the fiercely competitive track, the fee rate has also become a breakthrough for issuers to create differentiated competitive advantages, which is also the most effective way to compete. In terms of fees, BITB is the lowest among all Bitcoin spot ETFs, with a management fee rate of only 0.2%, and the management fee for the first six months of the first $1 billion in assets is 0; ETHW's fee rate is 0.2%, second only to Franklin Templeton "EZET" and Grayscale Ethereum Mini ETF "ETH", and the first $500 million or the first 6 months of fee reduction. Obviously, low fees are an important handle for Bitwise to win capital inflows.

 

In addition to the above conventional expansion strategies, Bitwise has also won the favor and recognition of the crypto community through financial support for the development of Bitcoin and Ethereum ecosystems.

 

At the launch of BITB, Bitwise announced that it would donate 10% of BITB's profits to three non-profit organizations that fund Bitcoin open source development, BrinkOpenSats and the Bitcoin Development Fund of the Human Rights Foundation. These organizations play a key role in improving the security, scalability and availability of the Bitcoin network. And these donations will be made at least once a year for the next 10 years to further support the health and development of the Bitcoin ecosystem; similarly, ETHW will donate 10% of the fund's profits to Ethereum open source developers Protocol Guild and PBS Foundation. The donation plan will also last for at least 10 years and will be carried out annually. The recipient organizations may change according to annual reviews. And in order to ensure transparency, BITB's Bitcoin address and ETHW's Ethereum address have been made public.

 

It is worth mentioning that Bitwise is highly "bullish" on the prospects of crypto assets. Bitwise CIO Matt Hougan recently said that the inflow of Bitcoin spot ETFs, Bitcoin halving, the change in political attitudes of Ethereum spot ETFs, and the prospect of interest rate cuts by the Federal Reserve have all created a better long-term environment for cryptocurrencies. Coupled with the strong growth of the stablecoin market, Layer 2 development, and the increasing participation of institutions such as BlackRock in this field, the right combination of developments in the second half of the year may easily push Bitcoin to $100,000. In addition, although the price of ETH is expected to be "volatile" in the first few weeks after the Ethereum ETF goes online, as funds may flow out of the trust after the $11 billion Grayscale Ethereum Trust (ETHE) is converted to a spot ETF, the price of ETH will exceed $5,000 and set a record high by the end of the year. If the flow is stronger than many market commentators expect, the price may be even higher.