While spot bitcoin ETFs are a hard act to follow, BlackRock’s iShares Ethereum Trust ETF — one of nine spot ether ETFs that began trading in the U.S. on July 23 — managed to attract $1 billion of net inflows in its first month despite a tough market backdrop, a Bloomberg Intelligence ETF analyst said.
In fact, not only did the ETF, known by the ticker symbol ETHA, attract significantly more assets than any of the other eight spot ether ETFs, it was the seventh-fastest growing U.S.-listed ETF launched this year through Aug. 23, according to Bloomberg Intelligence Senior ETF Analyst Eric Balchunas. The top four fastest-growing ETFs launched this year through that date were all spot bitcoin ETFs, he said.
Bitcoin is the largest cryptocurrency by market capitalization. Ether, the native cryptocurrency of the Ethereum network, is the second largest.
Given the success of spot bitcoin ETFs, which began trading in the U.S. on Jan. 11, the debut of spot ether ETFs was like “the opening band following the headliner,” Balchunas said.
“And I’m a Gen Xer — I use Sister Hazel having to follow Nirvana,” he said. “Opening bands are OK, it’s just hard to follow the headliner, especially when the headliner just broke the record for the most successful launch ever.”
Since it began trading through Aug. 23, the iShares Ethereum Trust ETF has attracted $992 million of net inflows, according to Morningstar. That was more than double the $382 million of net inflows taken in during that period by its nearest spot ether ETF rival, the Fidelity Ethereum Fund. The Bitwise Ethereum ETF was third with $304 million of net inflows.
“Obviously, BlackRock has just run away with it,” Balchunas said.
BlackRock’s spot bitcoin ETF — the iShares Bitcoin Trust ETF — had the most net inflows among U.S.-listed ETFs launched this year through Aug. 23 at $20.7 billion, according to Morningstar data.
The Fidelity Wise Origin Bitcoin Fund was next, taking in $9.9 billion, followed by the ARK 21Shares Bitcoin ETF with $2.6 billion, and the Bitwise Bitcoin ETF with just under $2 billion.
After those four spot bitcoin ETFs come two other ETFs, each of which was listed in June, Morningstar data shows.
The Invesco MSCI Global Climate 500 ETF, known by the ticker symbol KLMT, has attracted $1.6 billion of net inflows through Aug. 23, while the Global X Russell 2000 ETF, which has the ticker RSSL, has attracted nearly $1.4 billion, according to Morningstar.
However, KLMT and RSSL each received inflows from a single large investor, Balchunas said.
“Now ETHA, if you look at the flows, it’s basically taken in money just about every day,” said Balchunas, adding that for an ETF, gathering $1 billion in grassroots flows in the first month is an “elite start to your life.”
ETHA managed to attract those flows even though ether was down more than 20% during that period, he said.
In a June 27 news release announcing the launch of KLMT, Invesco said the sustainable energy ETF was listing with a $1.6 billion investment from Finnish pension insurer Varma. As of June 30, Varma had assets under management totaling €62.1 billion ($66.5 billion).
RSSL’s net inflows have come almost entirely from the $1.4 billion Global X Russell 2000 Covered Call ETF, known by the ticker symbol RYLD, switching its Russell 2000 exposure to RSSL, said Bryan Armour, director of passive strategies research for North America at Morningstar Research Services, a Morningstar subsidiary.
'Crypto fatigue'
Armour cited “crypto fatigue” as a key reason spot ether ETFs saw less investor demand than spot bitcoin ETFs.
“There was a lot of pent-up demand for crypto from investors that were stuck in traditional markets, and bitcoin ETFs were the release valve for that,” Armour said.
The iShares Bitcoin Trust ETF, which trades under the ticker symbol IBIT, was the top U.S. ETF ever as measured by the first six months of net inflows, raking in $17.8 billion, he said. The Fidelity Wise Origin Bitcoin Fund, which has the ticker symbol FBTC, ranks second with $9.2 billion of inflows during its first six months.
As of Sept. 5, IBIT had $20.1 billion in total assets while FBTC's assets totaled $9.8 billion, according to Morningstar.
In addition, crypto generally tends to be “very momentum-driven,” Armour said, citing the more than 20% decline in the price of ether seen during spot ether ETFs' first month of trading.
“That obviously doesn’t help, and I would expect greater adoption once performance turns around,” Armour said.
As for why BlackRock’s $797 million iShares Ethereum Trust ETF has dominated the race for net inflows among spot ether ETFs, Armour said it’s a story similar to the iShares Bitcoin Trust ETF’s dominance. He noted BlackRock’s position as the world’s largest asset manager.
“They have significant ETF experience,” Armour said. “They have (CEO) Larry Fink talking about crypto on the news.”
In a joint statement, Jay Jacobs, U.S. head of thematic and active ETFs at BlackRock, and Robert Mitchnick, global head of digital assets at the firm, said investor demand was the main driver for BlackRock to launch IBIT and ETHA.
Many investors “want better access to bitcoin and ethereum through a convenient and institutional-grade wrapper,” the emailed statement said.
“We believe cryptoassets are still at their nascency and broader adoption will take time and education,” the statement said.
