VanEck to close its Ethereum futures ETF in September, a year after launch

VanEck is closing its Ethereum Futures ETF (EFUT) by September 16, 2024.
The EFUT saw low asset accumulation as compared to VanEck’s spot Ethereum ETF.
Generally, Ethereum is facing challenges from competition and reduced network revenue and fees.

VanEck is set to close its Ethereum Strategy ETF (EFUT) by September 16, 2024, with liquidation expected by September 23.

EFUT, launched in October 2023, has struggled with low asset accumulation and performance compared to VanEck’s more successful spot Ethereum ETF (ETHV).

Strategic realignment

VanEck’s move to close the EFUT ETF comes as part of a strategic review of its ETF offerings. Launched in October 2023, EFUT was designed to provide exposure to Ethereum futures, but it amassed only $21 million in assets, contrasting sharply with the $63 million net inflows seen by the spot Ethereum ETF (ETHV).

The decision to liquidate EFUT aligns with VanEck’s ongoing assessment of factors such as performance, liquidity, and investor interest.

Shareholders of EFUT will receive cash distributions based on the net asset value of their holdings following the ETF’s closure and liquidation.

This shift reflects VanEck’s broader strategy of focusing on more successful crypto-related products.

Challenges facing Ethereum and Ether Futures ETF

VanEck’s August 2024 Crypto Monthly Recap highlights several challenges contributing to the recent Ethereum price struggles.

According to VanEck’s report, Ethereum’s share of decentralized exchange trading volume has dropped significantly from 42% in 2022 to 29% in 2024.

The report attributes this decline to several factors, including a general decrease in network revenue, deliberate policy decisions, and competition from higher-throughput blockchains such as Solana, Sui, and Aptos. These competitors are drawing speculative demand away from Ethereum, exacerbating its price issues.

Additionally, Ethereum’s layer-1 revenues have been impacted by competing layer-2 networks, which have led to a 99% drop in network fees since the Dencun upgrade in March 2024. This has intensified the competition within Ethereum’s ecosystem and driven the proliferation of layer-2 solutions, with some critics suggesting that the current number of Ethereum scaling solutions exceeds the necessary demand.

VanEck’s decision to close EFUT while continuing to offer other crypto-related products, such as the Digital Assets Mining ETF (DAM) and Bitcoin Strategy ETF (XBTF), underscores the firm’s ongoing engagement with digital assets despite the challenges facing Ethereum.