Tuesday, Oct 3, 2023

ETH ennui, Hong Kong markets, BTC dominance tells a new story?

“The silly question is the first intimation of some totally new development.” – Alfred North Whitehead ||

Hello everyone! I hope you’re all doing well.

You’re reading the daily premium Crypto is Macro Now newsletter, where I look at the growing overlap between the crypto and macro landscapes. There’s also usually some market commentary, but nothing I say is investment advice!

Yesterday I had a great chat with the wonderful Maggie Lake on the Real Vision Daily Briefing, only my camera froze, so don’t watch it please. 😂 If you want to listen to it with the video off, that’s ok. 😊

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IN THIS NEWSLETTER:

• ETH ETFs: not quite ready yet

• A tale of two prices

• Hong Kong dominates Asian institutional trading

• Yield curve signaling

• The Fed on Instagram??

WHAT I’M WATCHING:

ETH ETFs: not quite ready yet

Well, that was disappointing.

The first trading day of ETH futures ETFs was, shall we say, thin. So thin as to be almost transparent. Total trading volume, according to K33 Research, failed to reach $2 million. For contrast, first-day trading volume for the BITO bitcoin futures ETF back in October 2021 was roughly $1 billion.

Yesterday’s winner was the ProShares Ether Strategy ETF, which traded just under $880,000. Its two blended bitcoin/ether funds (market weight and equal weight) did around half that. VanEck’s ether fund came in second, with trading volume of $415,000, despite having a much lower expense ratio and despite the ad and communication campaign launched last week.

This goes to show, I guess, that being the leader in bitcoin futures ETFs delivers synergies when it comes to launching similar products. ProShares manages the market’s largest bitcoin futures fund by far, with AUM of around $1 billion, vs VanEck’s $45 million. Given ProShares’ hefty database of investors interested in crypto, it’s surprising that the initial volume wasn’t higher. It also goes to show that investors often prefer convenience over savings, choosing an issuer they know vs. one that offers better conditions.

It is also unfortunately a reminder that, when it comes to financial products, investors will prefer to deal with names they are familiar with, and that have deep experience with markets rather than with crypto. Bitwise, the only “pure” crypto issuer in the mix yesterday (Valkyrie’s fund launches today), raked in trading volume of $72,000 for its pure ETH exposure fund, while its mixed BTC/ETH fund did just over $100,000.