Investment firm Two Prime ditches Ether, citing unpredictable trading behaviour and poor performance. They shift to a Bitcoin-exclusive strategy, as Ether drops 45% YTD. Community reactions range from dismissal to viewing it as a potential buy signal. Ether ETFs also show disappointing results compared to Bitcoin ETFs, affecting institutional support.
In the face of declining prices, a US-based investment advisory firm, Two Prime, has announced a shift in strategy, opting to abandon Ether (ETH) and refocus solely on Bitcoin (BTC). After lending $1.5 billion in both BTC and ETH over the last 15 months, the firm made the change public on May 1. The firm expressed that the current trading behaviour, community culture, and overall value proposition of ETH had deteriorated beyond a point where engagement was relevant for them.
Ether has plummeted by 45% so far this year, leading to speculation amongst some optimists that a bottom could be approaching. However, Two Prime is taking a hard line, stating that ETH no longer behaves in a predictable manner. Unlike Bitcoin, which maintained its fundamental trading behaviour during recent market turbulence, they claim ETH’s performance has become erratic, resembling that of a memecoin. This unpredictability is proving challenging for both algorithmic trading strategies and ETH-backed lending operations.
The firm, which was set up in 2019 by Alexander Blum and Marc Fleury and is registered with the US Securities and Exchange Commission, has provided trading and lending services for BTC and ETH for six years. They highlighted that the correlation with Bitcoin has weakened and argued that this transformation in ETH’s trading pattern complicates their operations significantly.
Community reaction to Two Prime’s comments about Ether was swift, with several members perceiving them as yet another potential buy signal for ETH. Some users took to social media, criticising the firm’s opinions as trivial, while others speculated that this could mark a low point, anticipating a rebound in ETH’s price after the ongoing downturn.
Additionally, Two Prime pointed out the dismal performance of Ether exchange-traded funds (ETFs), noting that Bitcoin ETFs have surpassed Ether by nearly 24 times in terms of acquisition. They reasoned that the lack of enthusiasm around ETH ETFs results in a negative feedback loop, leading institutions like BlackRock to allocate fewer resources to promoting Ether in general.
Despite these challenges, ETH remains the primary altcoin for crypto ETFs regarding assets under management. CoinShares recently reported that Ether-based products held about $9.2 billion in assets, dwarfed only by BTC, while competitors like Solana and XRP held significantly less.
Following the approval of spot Ether ETFs by the US SEC in May 2024, these funds have struggled, especially in comparison to the enthusiastic launch of spot Bitcoin ETFs. Investor interest has lagged considerably. Significant issuers such as VanEck and WisdomTree have reversed course, with the former halting trading on futures Ether ETFs and the latter retracting its Ethereum Trust ETF proposal last September. Just this March, ARK made the decision to liquidate its futures ETFs for both Ether and Bitcoin, underscoring the current market woes.
