Bitcoin vs Ethereum ETF: Why One is Underperforming
Many cryptocurrency fanatics remember in January 2024 when Bitcoin ETFs were approved on a federal level in the United States. But did you know that an Ethereum ETF was approved just six months later?
Less popular than the Bitcoin ETF, the Ethereum ETF isn’t doing so well, and we were wondering why, so we decided to investigate. Keep reading to learn more about Bitcoin ETFs, Ethereum ETFs, and whether you should invest in them.
Bitcoin ETFs
First and foremost, let’s get a basic rundown of a Bitcoin ETF. ETF stands for Exchange Traded Fund, and what these are is a collection of exchange products grouped together to make one lower-risk product. While ETFs do vary overall in their trade risk, because they are made up of a collection of products rather than a single product, they are generally known to be less risky than investing in one company.
ETFs are not only a collection of products, but they are a collection of products typically in the same industry. The industry is usually the word that comes before the ETF acronym. For example, the Bitcoin ETF we speak of here is an ETF composed of several Bitcoin-based blockchain projects or products.
Since their legal launch in January 2024, Bitcoin ETFs have been absolutely killing it on the marketplace, returning an average of over 50% to investors. This is a crazy successful number, but it’s important to remember that this was the launch of a new product (therefore, not much we can compare it to) and that Bitcoin ETFs are slightly riskier than their non-crypto counterparts.
Related: The Best Bitcoin ETFs to Invest In
Ethereum ETFs
Like Bitcoin ETFs, Ethereum ETFs are index funds composed of Ethereum and Ethereum-related projects. However, unlike the Bitcoin ETFs, only a few Ethereum ETFs have been approved to date, and currently, the returns of Ethereum ETFs aren’t the greatest.
Ethereum ETFs became legal in June 2024, six months after Bitcoin ETFs, and to date, they don’t have much to show in returns to customers (but again, it’s early!).
Related: Ethereum and the SEC: The Drama Unfolds
5 Reasons Why the Ethereum ETF Isn’t Performing Well
There are several reasons the Ethereum ETFs are underperforming, and some of them may surprise you. We will go through the details of each one below.
1. The Popularity of the Crypto Behind the ETF
Bitcoin is more well-known that Ethereum worldwide and this is one of the major reasons that the Ethereum ETF didn’t take off as quickly—simply because people weren’t as interested.
Many well-known news sites like Forbes and Wall Street Journal announced the Bitcoin ETF the day it was approved, but many of these websites didn’t mention the Ethereum ETFs when they were approved, thus less people knew the Ethereum version had launched.
2. There Are Less Ethereum ETFs
As the more popular of the two cryptocurrencies, the day of launch there were 8+ Bitcoin ETFs ready for investors, and several others in development. The same can’t be said for Ethereum.
Ethereum, as the less popular crypto, only had one or two ETFs on launch day, and even now, months later, we’ve only heard of half the amount as there are Bitcoin ETFs. Whether or not there will be more in the future, we aren’t sure.
3. More Complex to Invest in
Bitcoin products, in general, are more straightforward than Ethereum products. This is because Bitcoin is just Bitcoin, a method of stored value, and several products and projects have been based on it.
On the other hand, Ethereum encompasses the NFT market, altcoins, and many token standards, which makes product lines much vaster and more varied than the Bitcoin one. This creates a final ETF that is much more varied and harder to predict than the Bitcoin market (which is already hard to predict—making the Ethereum one extra hard).
Additionally, while scams exist in both cryptocurrencies, the scams are much more prolific in Ethereum ETFs, meaning whoever is the custodian/manager of the fund must spend more work/time putting the fund together.
4. Higher Costs
As mentioned above, being a custodian of an Ethereum based ETF is a lot harder than a Bitcoin ETF and, as a result, the fees to invest in these funds can be much higher than their Bitcoin counterparts. While this isn’t always the case, it is mentioned in some of the comparisons between the two funds.
5. The Law of Primacy
The law of primacy states that humans are more likely to remember something the first time they hear or see it, so if they see bad information about a topic first, it will stick easier than if they learn the correct information later.
As such, because the Bitcoin ETF launched 6 months before the Ethereum ETF, this contributes to its popularity and is likely one of the reasons the Ethereum ETF hasn’t seen quite the same hype. That being said, it’s still very early, so don’t discount the Ethereum ETF just yet!
Should You Buy the Bitcoin or Ethereum ETF?
Here at MintDice.com, we aren’t investment advisors, and you’ll likely want to consult with one before investing in either of these products. But, we can say that if you are interested in investing in cryptocurrency but are risk adverse, these ETFs can be a more comfortable way to get your feet wet.
Bitcoin and Ethereum ETFs are both legal on the federal level in the US, and there are many reputable companies that offer them. Remember, though, that just because a company is reputable doesn’t mean you will gain a return on your investment. While losing everything is less likely with ETFs, it isn’t impossible, and you’ll want to consider that before placing your investment.
Overall, both the Bitcoin and Ethereum ETFs are decent investment products you might want to consider for your portfolio. While the Ethereum ETFs haven’t exactly gone “to the moon” yet, they are in the early stages of their development and could take off in the future.
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