The fragile cryptocurrency market is swaying during the fall. And winter is coming. In a time when investors are shying away from risk due to the economic downturn and the wars in the Middle East and Ukraine, the long-awaited debut of a group of exchange-traded funds tracking ether in the United States provided further evidence of the malaise.

According to CoinShares statistics, the six ETFs introduced on October 2 that provide exposure to ether futures contracts made a little under $10 million in their first trading week. In the week ending October 13, Ethereum products had outflows of $7.5 million, according to the statistics.

Vetle Lunde, senior analyst at K33 Research, said, “the timing of the futures ETFs could hardly be worse.”

Treasury yields reached their highest level in decades the week of October 2, as investors withdrew funds from riskier assets in response to “higher-for-longer” interest rates.

According to CoinGecko, ether prices have fallen more than 5% so far this month, and the market cap of cryptocurrencies has shrunk from $1.15 trillion to $1.12 trillion.

According to K33 Research, the trading volume for the ether futures ETFs on their debut day was under $2 million. In contrast, the first fund to follow bitcoin futures, the ProShares Bitcoin Strategy ETF (BITO.P), attracted inflows of almost $570 million when it began trading in October 2021.

The comparison with ETF releases during the peak of the cryptocurrency mania in 2021 demonstrates how institutional investors, who were a major driver of demand at the time, have pulled back from digital assets as the macroeconomic picture has become increasingly hazy.

Since August, activity in crypto ETFs has slowed. Lunde recorded global net withdrawals of 11,157 bitcoin from bitcoin ETFs between August 1 and October 3. Many conventional investors choose these funds because they provide simpler access through standard stock exchanges without requiring direct cryptocurrency ownership.

Chief Investment Officer of IDX Digital Assets, Ben McMillan, stated that his company was structuring investments more defensively until there was more clarity on Federal Reserve policy and the risk of a recession.

“Investors are battening down the hatches and looking at how to make their portfolios more defensive,” McMillan said. “Speculative assets – even with a compelling growth thesis – are just a much lower priority now.”

TO BITCOIN AGAIN?

The fact that Bitcoin was the first “digital gold” has helped it somewhat, outperforming ether this month with decreases of approximately 2%. The week ending October 2 witnessed a $43 million influx into bitcoin-focused ETFs, while bitcoin’s market capitalization percentage increased to 48% from 47%.

The price of ether has increased 32% this year, less than Bitcoin’s almost 70% increase. The recently introduced ETFs from ProShares (EETH.P), VanEck, and Bitwise (AETH.P), which track just ether futures on the Chicago Mercantile Exchange, have all fallen more than 6% since their introduction.

While Valkyrie Funds changed its pure-play bitcoin ETF into one with exposure to both bitcoin and ether (BTF.O), ProShares and Bitwise introduced funds tracking a combination of bitcoin and ether futures. These dual-exposure funds have done better, with Valkyrie’s edging up 0.3% and Bitwise’s and ProShares’ down approximately 3%.

Although the reaction to the ether futures ETFs has been modest, McMillan at IDX stated that variables like the deployment of the Ethereum blockchain by significant financial institutions in the tokenization of assets might entice investors back to the table. “Right now, the macro backdrop is dominating everything.”