Can a crypto ETF die of apathy?

How it started:

How it’s going:

Monday’s new activity of . . . zero! . . . . gives the combined ether spot ETF complex a $6.7bn net asset value — though the important word there is “net”. The Grayscale Ethereum Trust (ETHE) zombie fund accounts for slightly more than $4bn of the total, having converted from a trust to an ETP in July.

Five spot ether ETF issuers have introductory offers that waive fees, which are typically about 0.25 per cent a year. Grayscale charges its legacy clients 2.5 per cent. Any punter that volunteers to pay that rate may be seeking to avoid tax (or other government functions), or could be stuck with the wreckage of arbitrage trades gone bad. Whatever the excuse, this $4bn now looks like dead money.

Grayscale allows switching from ETHE into a drip-tray ETF known as Mini, which currently waives its sector-leading fee of 0.15 per cent, but very few of its customers have taken up the offer. Inflows to Mini since launch have totalled just $295mn. Redemptions from the main Grayscale fund are $2.96bn.

As a result, since ether ETFs came into being, mainstream money has exited. ETHE redemptions have exceeded by $551mn the inflows to the rest of the ether ETFs combined. That’s not how it was meant to go!

Assets under management for the spot ether ETFs complex (ex ETHE) were $2.69bn as of Monday — but again this figure needs qualification. Grayscale’s Mini fund started out with $920mn of seed capital, much of which has already evaporated:

Once adjusted for seed capital values, according to our back-of-the-envelope calculations, ether spot ETFs (ex ETHE) have erased about $650mn of client money in the four months since launch. The reaction among early adopters is summed up by the activity figures at the top of the post. It’s been a tough way to learn about the natural corollary of a number-go-up investment case.

Further reading:
— Talk to your kids about their spot bitcoin ETF use (FTAV)
— Imaginary bitcoin ETFs are already 30 times more valuable than all the actual bitcoin ETFs (FTAV)
— Is the worst over for Bitcoin? (FTAV)