The Closure of VanEck’s ETH Futures ETF: A Shift towards Spot ETFs

The recent closure of VanEck’s ETH Futures ETF (EFUT) due to low assets under management has sent ripples through the cryptocurrency market. The decision was made shortly after the ETF was unveiled in October 2023, as investors blamed low assets under management for the shutdown.

Despite attracting more investment than anticipated, the EFUT ETF had only amassed $21 million in assets by then. This situation prompted VanEck to reevaluate its offerings and decide to liquidate the fund.

Industry experts have identified the inherent drawbacks of futures ETFs, such as roll costs and contango, as contributing factors to the EFUT’s failure. However, VanEck’s spot ether EFT, also known as VanAck Ethereum ETP (ETHV), has performed better, attracting $63 million in net inflows.

The triumph of ETHV underscores the growing popularity of spot ETFs, which can directly track the price of an asset without the complexity and overhead of future contracts.

Not only is the closure of its EFUT (Ethernet Futures Fund for Value) event notable, but Grayscale Investments also withdrew its application for an ether futures ETP in May.

VanEck’s decision to shut down underperforming ETFs in the past was attributed to changing market sentiment and the growing popularity of spot ETPs. The company also closed its bitcoin futures EEF shortly after launching a spot BTC fund in January.

The decision to liquidate EFUT was likely influenced by the increasing demand for spot ETFs and the poor performance of futures-based funds.

VanEck explained that factors such as performance, liquidity, assets under management, and investor interest were taken into account when deciding whether to sell a more liquid fund or continue with its existing offerings.

The fund’s returns can be eroded over time due to roll costs, which occur when a futures contract is rolled over to repurchase or sell. Additionally, contango, where the price of e.g. ETHV, an ETF with spot pricing, can also cause investors to lose money.

The cryptocurrency market is likely to undergo significant changes, leading investors towards spot ETFs over futures-based options. EFUT’s closure serves as a reminder of the fast pace of investment in this area, with investors demanding more efficient and cost-effective investment products.

Traders are realizing the maturation of spot ETFs, where they can maximize the benefits of digital assets while avoiding unnecessary costs.

VanEck’s decision to shut down its ether futures ETP is indicative of the growing popularity and growth of cryptocurrency exchanges. The cryptocurrency market is expected to adapt and innovate based on the needs and demands of its participants, as the industry continues to grapple with the challenges and opportunities presented by digital assets.

For more insights and information on the cryptocurrency market, check out this article on Spot ETFs Gain Traction as Investors Flee Futures-Based Funds on CoinSeeks.com.

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