On the Margin Newsletter: The ether ETF edition

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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner and. Here’s what you’ll find in today’s edition:

• It’s very likely that today is the last trading day without a US spot ether ETF available. Let’s talk about how we got here.
• Biden is out, Harris may be in. We break down market reactions after an eventful Sunday.
• It’s the last week ahead of the FOMC meeting. Read about what we’re watching for.

The ether ETF timeline

We’re in the midst of something historic — and no, I’m not talking about President Biden’s decision to bow out of the 2024 presidential race.

There’s another race set to start: the US spot ether ETF battle for assets. Those funds are expected to launch tomorrow, people close to the process have told Blockworks.

Beyond the competition between issuers, the launches reflect history in the making. The first US ETFs directly holding bitcoin launched in January. Now, six months later, ether funds are set to represent another milestone.

Let’s take a look back at how we got here:

• December 2017: CME launches bitcoin futures.
• February 2021: CME introduces ether futures.
• October 2021: The US securities regulator gives the green light to ETFs holding bitcoin futures contracts.
• June 2022: Grayscale Investments launches a lawsuit against the SEC after the agency rejected the conversion of GBTC to an ETF.
• May 2023: Issuers submit, and then withdraw, ether futures ETF applications.
• July/August 2023: Ether futures fund filings surface again, with sources telling Blockworks the SEC is now ready to consider the products.
• August 2023: Grayscale notches a legal victory over the SEC that would ultimately help pave the way for bitcoin ETF approval.
• September 2023: Fundgroups, such as VanEck and 21Shares, start applying for spot ether ETFs. BlackRock, the world’s largest asset manager, would follow suit in November.
• October 2023: Six ether futures ETFs begin trading in the US.
• January 2024:The SEC approves spot bitcoin ETFsin a landmark decision.
• March 2024: Bitwise files for a spot ether ETF and includes research in its filing.
• April 2024: Consensys sues the SEC, claiming the agency seeks to regulate ETH as a security.
• May 22, 2024: Crypto sees increased bipartisan support, with the House of Reps passing the FIT21 Act. That same day, five congressmen — three Republicans and two Democrats — write a letter to SEC Chair Gary Gensler, urging the SEC to allow spot ether ETFs.
• May 23, 2024: The SEC approves 19b-4 proposals submitted by exchanges on which the planned ETH funds would trade. This came after a possibly politically motivated change of stance.
• July 17, 2024: Fund issuers submit apparent finalized registration statements with details (such as the ETH ETFs’ fees) filled in. People close to the process tell Blockworks they expect the SEC to deem these “effective” on June 22 (today).
• July 18, 2024: Grayscale Investments reveals a 0.15% planned fee for its Ethereum Mini Trust, undercutting the intended price points of its competitors.
• July 19, 2024: Cboe notes in filings that ETH ETFs by VanEck, Fidelity, Franklin Templeton, 21Shares and Invesco/Galaxy are set to list on July 23, “pending regulatory effectiveness.”

Phew, and that brings us to today!

The US spot ETH ETFs will not stake their holdings, a feature that could deter some investors, we’ve heard.

Still, industry watchers expect the funds to attract significant investor capital — with some estimates ranging from about 15% to 30% of the net inflows US spot bitcoin ETFs have seen ($17 billion in six-plus months).

This new ETH access unlock for a broader set of investors will be just one thing we keep an eye on in what expects to be an eventful second half of 2024.

— Ben Strack

$230 million

The amount hackers exploited from Indian exchange WazirX late last week, prompting the platform to halt trading over the weekend. The exploit accounted for nearly half of WazirX’s reserves, the company said Sunday.

By Monday morning, the company posted that it was “actively working on enabling withdrawals for our users,” but the status of assets remained unknown.

The security breach comes after hackers made off with cryptocurrencies worth more than $1.3 billion during the first half of 2024, according to a recent report from TRM Labs.

Markets avoid the ‘Sunday scaries’

The biggest news of the week (or year, rather) came on Sunday afternoon when President Joe Biden announced he was dropping out of the presidential race. Shortly thereafter, he endorsed Vice President Kamala Harris as the Democratic nominee.

When Biden dropped the news, CNN anchor Wolf Blitzer was sipping an Aperol spritz at El Presidente in DC. I, meanwhile, was on the Long Island Rail Road, where I may or may not have been regretting some Aperol spritzes of my own from the weekend prior. We were both, unfortunately, called into work. It’s probably safe to say though that no one had the so-called “Sunday scaries” worse than Biden.

Today, everyone is digesting the news. The big questions now are who Harris will pick as a running mate, with many wondering if she will even secure the Democratic nomination. The election is just 106 days away.

Despite the political uncertainty, stocks posted a strong start to the week Monday, bolstered by a rebound in tech stocks. NVIDIA gained as much as 4%, paring losses from last week, while Meta and Alphabet gained roughly 2.5% each.

The S&P 500 and Nasdaq Composite indexes were trading 1% and 1.5% higher, respectively, as of 2 pm ET.

Crypto assets, on the other hand, were in the red. Bitcoin edged slightly lower after initially jumping as high as $68,495 on Sunday afternoon. The largest cryptocurrency was hovering around $67,300 at 2 pm ET.

Even as spot ETFs gear up to launch tomorrow, ETH was also losing steam on Monday, down 1% at 2 pm ET.

Polymarket on Monday afternoon showed Trump leading with a 65% chance of winning. Harris, whose odds on Polymarket hit 40% Sunday, lost a bit of confidence and was hovering around 29% Monday. Betting markets show Harris has a 82% chance of securing the Democratic nomination.

— Casey Wagner

On Our Radar

Happy Monday and welcome back to another week of the On the Margin newsletter. This week is the last before the Federal Open Market Committee gathers for their policy-setting meeting on July 30-31. Investors will be hoping for more signs of growth, especially after last week’s generally positive data. Here’s what we are watching:

• The first data drop of the week will come on Tuesday just after the open with the S&P flash PMIs. We will get the services and manufacturing numbers for July, which are both expected to come in just below June’s figures. The flash figures are just early estimates, of course, but any sign that the economy is maintaining a strong level of activity will be a positive for markets.
• Thursday’s GDP report for the second quarter and the weekly initial jobless claims should give investors a decent look into what to expect next week. Central bankers are looking to achieve a soft landing, a goal many economists say is too ambitious, so the timing of rate cuts will have to be perfect.
• On Friday, the most important economic figure will drop: the PCE, which is the Fed’s preferred inflationary measure. Analysts expect the year-over-year figure to come in at 2.5%, which would be just a slight drop from the 2.6% annual rate recorded in May. Core PCE, which excludes volatile food and energy prices, is expected to remain the same month-over-month.

— Casey Wagner

Bulletin Board

• Even amid a recent market dip, crypto fundraising appears to remain strong as we move into the second half of 2024. Last week, omnichain data network Chainbase announced a $15 million raise. Allium, Visa’s data partner, secured $16.5 million in funding.
• Bitcoin financial services provider Swan is abandoning its IPO plans and “unlikely” to continue their Managed Mining business, CEO Cory Klippesten said Monday. The company also made “staff cuts across many functions.”
• Casey will be on the ground at Bitcoin 2024 in Nashville later this week. Stay tuned for some conference-related coverage and say hi if you’ll be there as well!