Originally published on: September 06, 2024
VanEck, a prominent asset manager, has made the decision to close its futures-based Ether exchange-traded fund (ETF) in response to the overwhelming dominance of spot cryptocurrency ETFs in terms of inflows. The announcement, made on September 6, stated that the demand for spot cryptocurrency ETFs has overshadowed its futures-based counterpart, ultimately leading to the closure of the fund.
Citing various factors including performance, liquidity, assets under management, and investor interest, VanEck concluded that it was in the best interest to shut down the VanEck Ethereum Strategy ETF (EFUT). Share trading for the EFUT will cease on September 16, with the liquidation of fund assets scheduled to take place around September 23.
The decision did not come as a shock to Nate Geraci, President of The ETF Store, who predicted in 2023 that spot crypto ETFs would render futures-based crypto ETFs obsolete. Geraci speculated that VanEck may have seen the EFUT primarily as a marketing expense rather than a viable investment opportunity.
Launched in 2023, the EFUT managed only around $21 million in assets under management as of September 6, compared to the VanEck Ethereum ETF (ETHV) with more than $55 million in AUM. The emergence of spot ETH ETFs in the United States in July, authorized by the Securities and Exchange Commission, marked a pivotal shift in the market. Collectively holding approximately $6.5 billion in AUM, spot ETH ETFs vastly outstrip futures-based ETH ETFs in terms of popularity and demand.
Spot ETH ETFs have gained significant traction since their launch, with fund issuers introducing nine such ETFs in July alone. Leading the pack is the Grayscale Ethereum Trust (ETHE), managing almost $4.2 billion in assets, according to Morningstar.
Unlike spot ETFs, futures-based ETFs incur additional costs related to rolling over contracts on a monthly basis. This often results in futures-based ETFs underperforming their spot counterparts due to the added expenses.
The closure of the EFUT by VanEck is indicative of the rapid evolution of the crypto ETF landscape, with spot ETFs taking center stage over futures-based alternatives. As the crypto market continues to develop, it will be interesting to see how ETF offerings adapt to meet investor demand and market trends.
