Spot Ether EFTs Top $1 Billion in Volume But Bitcoin Comparisons Could be Short-Lived

The launch of nine-spot Ether exchange-traded funds (ETFs) heralded a brave new world for cryptocurrency adoption on Wall Street, with the world’s largest altcoin amassing over $1 billion in trading volumes on its first day. Is the ETH ETF’s performance a statement of intent? Or a flash in the pan?

Spot Ether ETFs commanded an opening day cumulative trading volume of $1.08 billion. This total has been heralded as a success by James Seyffart, senior ETF analyst at Bloomberg, with BlackRock’s iShares Ethereum Trust ETF (ETHA) drawing in $266 million in investment.

Ether’s opening day attracted around 23% of the total trading volume experienced by Bitcoin on the first day of trading for the cryptocurrency’s spot BTC ETFs in January 2024.

While it would be fanciful for investors to expect Ether to emulate Bitcoin’s success as the most successful ETF launch in financial history, the cryptocurrency’s superior functionality has often caused its biggest supporters to speculate that Ethereum could one day replace Bitcoin as the world’s most dominant cryptocurrency.

Early Warning Signs

On its second day, spot Ether ETFs experienced a dip in trading to $951 million in cumulative trading volume, representing a logical dip in the wake of its opening day furor.

Despite this relatively strong start to life on Wall Street, there are some warning signs that the impact of the ETH ETF may not be all it seems.

The value of Ethereum, the cryptocurrency attached to the spot Ether ETF, fell almost 10% on the second day of trading. The cause for this stemmed from concerns over the hefty $133 million outflows for the exchange-traded fund at such an early stage in its launch.

The underlying asset tumbled to a value of around $3,150, pushing the coin further adrift from its all-time high of $4,878, recorded in November 2021.

Perhaps more worrying is that Ethereum has failed to generate meaningful momentum since Q1 2024, when the cryptocurrency was driven higher by Bitcoin’s post-ETF rally.

Despite the SEC’s approval of spot Ether ETFs in May, ETH ended Q2 2024 lower than the first quarter.

So why has Ethereum failed to rally as a result of its exchange-traded fund? One solution could be that investors were more willing to sell the news than treat it as a long-term hold opportunity. The other, more worryingly, is that investors don’t have enough faith in the longevity of Ethereum.

Measuring the Significance of Ether

Although it’s fair to say that Ether and Bitcoin are extremely different cryptocurrencies, it’s actually Ethereum that has a technical advantage over its more famous counterpart.

Bitcoin’s market capitalization of $1.28 trillion is a major draw for investors due to its scarcity and pre-programmed halving mechanism that’s expected to keep its long-term value rising.

Ethereum, however, is far less scarce but offers significant technical advantages that Bitcoin could never compete with. Today, Ether is a driving force in the thriving decentralized finance (DeFi) ecosystem.

Powering major blockchain innovations like smart contracts, new consensus mechanisms, non-fungible tokens (NFTs), peer-to-peer (P2P) lending, and much more, Ethereum ETFs offer investors the chance to buy into the next generation of financial technology.

“Overall, the approval of spot Ethereum ETFs is likely to lead to wider adoption, greater market liquidity, and increased legitimacy for Ethereum, as well as potentially increasing institutional investment and positively impacting the broader cryptocurrency market,” explained Maxim Manturov, head of investment research at Freedom24.

It’s this element of increased legitimacy that could be telling in the future. The arrival of ETH ETFs on Wall Street could see more confidence in Ethereum’s DeFi projects grow, helping to drive more Ethereum blockchain adoption.

Threats to Ethereum’s DeFi Dominance

If comparisons between Ethereum and Bitcoin are illogical because of how different both cryptocurrencies are, it may be more useful to compare the former with its younger rival, Solana.

While Ethereum has grown around 70% over the past year, Solana has rallied more than 630% and has consistently been described as an ‘Ethereum killer’.

Packed with a more advanced blockchain that facilitates faster network speeds and lower gas fees, Solana has been building momentum in recent months. So, could Ethereum fall into trouble in the face of mounting competition?

Solana’s co-founder, Anatoly Yakovenko, believes that Solana and Ethereum should be seen as a more collaborative presence within the cryptocurrency landscape, with both blockchains capable of coexistence.

Is it Time to Buy Ethereum’s ETF?

Although Ethereum will certainly face challenges to its position as a leader in decentralized finance as the space continues to grow, it’s worth investors celebrating the contrasts between Ether and Bitcoin.

While both assets have a key role to play in the future of cryptocurrencies, Ethereum’s functionality makes it fundamentally different from Bitcoin. While this means that some of the excitement surrounding the asset’s arrival on Wall Street has been muted, Ether’s more dynamic market proposition could pay dividends as a long-term hold.