CF Benchmarks Recap - Issue 28

Three simultaneously launched Ether ETFs underlined their sponsors’ willingness to go head-to-head.

CF Benchmarks Recap - Issue 28
  • Evolve’s ETHR ETF first out of the gate

  • Ether AuM growth pulls ahead of Bitcoin

  • WisdomTree re-lists Bitcoin ETP on Xetra

ETHR crowns ‘Ethereum Week’
Ether permeated the institutional investment space this week with a benign price corollary. An inquisitorial media climate weighed on Bitcoin. Three simultaneously launched Ether ETFs underlined their sponsors’ willingness to go head-to-head. Then, Evolve ETFs’ fee suspension till end-May and CI Global’s till mid-June signalled confidence in demand and competition to serve it. Evolve’s Ether ETF (ticker: ETHR) stood out: 1. It calculates NAV from CME CF Ether-Dollar Reference Rate (ETHUSD_RR), meaning it’s the only Ether ETF that’s backed by a public and transparent pricing methodology; and whose market integrity, representativeness and replicability have been demonstrated by research. 2. Settlement of CFTC-regulated CME Ether Futures to ETHUSD_RR denotes unmatched institutional liquidity, boding well for a superior ETHR tracking error. More broadly, with Ether demand in the ascendant, blockchain kinks were shrugged off, with the Ethereum Improvement Proposal (EIP) grabbing more attention. EIP could rebalance the transaction fee (‘gas’) regime and inhibit “net annual issuance”. Cue resurgent Ether peaks whilst Bitcoin ailed. ETHUSD_RR’s new top: $2,643.92, timestamp 22/04/2021, 16:30 UTC. BRTI printed April’s low: $47,529.03 at 0810 UTC. Climate Summit and Earth day had provided an inevitable opportunity for renewed condemnation of Bitcoin’s questionable environmental impact, somewhat balanced by reasonable projections of its potential to promote clean energy. Among traders, ETH/BTC’s advance above 0.04 prompted anticipation of an equally notional 0.1. Regardless, ETH inched further out of BTC’s shadow this week. Markets, institutions and investors expect this to continue.

ETHR Bytes
Benefits accrue from Evolve’s Ether ETF (ETHR) using ETHUSD_RR as NAV calculation index. ETHUSD_RR also settles CME Ether Futures, the only futures permissible for institutions, indicating further open interest growth beyond the $220m recorded this week. Meanwhile. ETHR’s first-week AuM growth was set to be above C$8m. Evolve’s peer, Caldwell launched U.S. Dividend Advantage Fund a year ago. Its AuM closed March at C$5m, according to Canada’s ETF Association.

ETH’s April AuM growth outpaces BTC’s
CryptoCompare’s monthly digital asset management review backs optics of a strong ‘moment’ for Ether. Ethereum’s AuM share of all assets monitored grew 30.5% to $8.96bn and stood at 16% of total digital asset AuM. Despite its mid-April all-time high above $64k, Bitcoin’s AuM share slipped 2.9%, though admittedly, it retained a 78% share of total digital asset AuM.

WisdomTree times ETP re-listing adroitly
WisdomTree EU’s listing of Bitcoin ETP (WBIT) on Deutsche Börse’s Xetra could aid BTC AuM. It’s a liquidity upgrade from WBIT’s SIX listing, in Switzerland. Timing is excellent as the SEC reviews WisdomTree Bitcoin Trust ETF (WBTC). WBIT’s iNAV is calculated from BRR; WBTC valuation would be based on sister index CF Bitcoin US Settlement Price.

The Returns: CF Stellar Lumens-Dollar Settlement Price
XLMUSD_RR is nominal best performer among single-asset indices, outside BRR and ETHUSD_RR, listed for at least a year. Aside from the cross asset-class melt up, the launch of a Lumens ETP (concluded this week) helps account for XLMUSD_RR’s >500% total return since April 28, 2020. Friday’s $0.42092 close was down 14.85% on the day and compares to a $0.63214 top on April 15 (up 821.08% on the year). Screenshot-2021-04-23-at-21.25.46

Featured benchmarks: CME CF Ether-Dollar Reference Rate

Why price liquidity matters for Evolve’s ETHR ETF

Evolve ETHR’s NAV is calculated with CME CF Ether-Dollar Reference Rate, the most liquid, regulated Ether price

Ether ETFs flow
It’s a testament to Canada’s progressive institutional investment market that the first three Ether ETFs in the world were approved by the Ontario Securities Commission earlier this month, with all three beginning to trade this week.

It’s also another positive signal for the cryptoasset class as the pace of breakthroughs appears to accelerate. Just weeks ago, ETFs investing in the preeminent digital asset, Bitcoin, didn’t exist. Now, several exist, with four in Canada alone and the first-ever crypto portfolio ETF, Hashdex Nasdaq Crypto ETF, whose reference index is devised and managed by CF Benchmarks, trading on the Bermuda Stock Exchange.

This flurry of launches points to significant institutional investor demand—often reflective of consumer demand—for the simplified and most importantly, regulated, structure of ETFs as vehicles for crypto investment.

Competition follows
The other side of that demand is competition. And competition has been very much in evidence this week. Apart from the willingness of those Ether ETF sponsors to go head-to-head with each other by launching on the same day, this week saw a set of series of fee reductions—quite like the ones seen when Bitcoin ETFs began trading. First, Evolve announced that it would waive the management fee of its Ether ETF (TSX ticker: ETHR) until May 31st. A day later, CI Global Asset Management swiftly followed by slapping a “zero” management fee on its CI Galaxy Ethereum ETF till June 15th. CI’s fund was initially announced with a 0.4% fee. That left only the Purpose Ether ETF retaining its launch fee of 1% at the time of writing.

Commercial competition is healthy from a client perspective if it reduces client costs. Lower fees can, however, sometimes cloud other just-as-important factors that prospective ETF clients need to consider when choosing which one to invest in.

What price of Ether
One of the most critical is highlighted by the differing approaches to reference pricing and net asset value (NAV) adopted by Ether ETF sponsors. Purpose Ether ETF uses the TradeBlock ETX Index to calculate NAV. CI Galaxy Ethereum ETF’s holdings are priced by the Bloomberg Galaxy Ethereum Index.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell any of the underlying instruments cited including but not limited to cryptoassets, financial instruments or any instruments that reference any index provided by CF Benchmarks Ltd. This communication is not intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. Please contact your financial adviser or professional before making an investment decision.