The price of Ethereum has fallen for three weeks in a row, despite the fact that SEC approved ETFs based on spot Ethereum. This week, it reached a low of $2,118 as Bitcoin and altcoins plunged.
Why ETH crashed
Ethereum also has lost its momentum since Jump Trading kept dumping their tokens. Arkham’s recent data shows that Jump Trading has seen its assets drop sharply over the last few weeks, and are now worth more than $368 million. Jump holds Ether tokens valued at over $20 million.
Ether, on the other hand, has been underperforming due to the low inflows into its Ethereum ETFs.
DeFi Llama data shows the Grayscale Ethereum Trust is the largest Ether ETF, followed by iShares Ethereum Trusts (ETHA), Fidelity Ethereum Funds (FETH), Bitwise Ethereum Funds (ETHW). The funds have a combined value of over $4.99 Billion, $743 Million, $281 Million, and $232 MILLION.
As we witnessed with Bitcoin ETFs back in January, many Grayscale fund holders have moved their assets to other ETFs. The fund’s expense ratio is 2.50% which makes it one of the highest in the ETF sector.
The Grayscale Mini Ethereum Trust has the lowest expense ratio of 0.15%.
Ethereum and other cryptos also fell as the Japanese carry trade continued. Investors took advantage of the low rates in Japan for a very long time to invest overseas where interest rates are higher.
There was also concern about the US entering a recession following the publication of weak economic statistics by the US government. The unemployment rate has increased to 4,3%, while wage growth is stagnant.
These are three of the reasons that many investors avoid spot Ethereum ETFs.
Ethereum faces strong competition
First, investors avoid Ethereum ETFs because the network faces significant competition from layer-1 networks. Other networks have been gaining market share fast, even though Ethereum still has a dominant position in certain industries such as Decentralized Finance and Stablecoins.
DeFi Llama’s most recent market data shows, for example, that Solana networks such as Raydium, Jupiter and Orca, are increasing their share of the market. In July, they processed over $58 billion while Ethereum only handled $53 billion. The growth of Solana coin memes like Dogwifhat and Book of Meme is largely responsible for this growth.
Justin Sun’s Tron also has a significant market share within the stablecoin sector, which handles daily transactions of over 40 billion dollars. Tether is popular on Tron due to its lower transaction fees than ERC.
Ethereum is still the leader in many areas. This includes fees. This year it has earned over $1.8billion, which is more than Tron, Bitcoin and Solana. This week alone, Ethereum hit a new record-low against Solana.
Ethereum ETF Fees
Investors avoid Ethereum ETFs because they have high fees. Grayscale Ethereum ETF charges a 2.5% expense ratio. This means that $100,000 invested will cost you $2,500 per year. It is an impressive amount, considering most ETFs on Wall Street are less than 0.2%.
iShares Ethereum Trust, like most other Ethereum Trusts in the market charge a 0.25% service fee. These fees may be normal but many investors prefer to purchase Ethereum, and then store it on their exchange account or wallet. It makes sense, since Ether-based ETFs track Ethereum’s price.
Gold and gold ETFs are a good example. Gold has risen 26.95% over the past 12 months, while iShares Gold Trust and SPDR Gold Trust have risen 26.3% each.
The yield of ether staking
In addition, Ethereum ETFs have been avoided, because applicants did not include the stake element in their applications to get approval from the SEC. These funds do not pay out a return to their investors.
StakingRewards data shows the Ethereum staking rate at 3.5%. This means that $100,000 invested will yield over $3,000, all other factors being equal. Ether investors are investing over $88 Billion in companies such as Lido Finance. Ether.fi. Rocket Pool. Frax Finance. and Staderlabs.
Lido Finance is the largest liquid stake platform, yielding 3.95%. Frax offers a yield of 375%. Ankr yields 4.2%.
Investors lose 4.2% of their annual opportunity costs when they take Lido’s stake reward, which is 3.95%. Restaking is a method of staking cash on liquid platforms again to generate higher returns. This increases the opportunity cost.
Investing in Ethereum ETFs has many advantages, such as the simplicity of management and use. Also, they are more liquid. The benefits of purchasing and staked them are greater than the disadvantages.
The post Why Ether ETFs ETHA, FETH and ETHW are failing may change as new information becomes available.
