DOGE ETF had a cold debut! Grayscale GDOG only 1.4 million,惨输 XRP hundred times.

The launch trading volume of Grayscale's first U.S. Spot DOGE ETF fell short of analyst expectations. Bloomberg analysts stated that the Grayscale Dogecoin Trust ETF (GDOG) had a trading volume of $1.4 million on Monday, below their expected $12 million. While this is still robust for an average launch, it is relatively low for a “historic first Spot” product.

Grayscale GDOG first day only 1.4 million dollars far below expectations

(Source: Eric Balchunas)

Grayscale Dogecoin Trust ETF (GDOG) officially listed on the US stock market on Monday, becoming the first Spot ETF in the United States to directly hold DOGE. However, the $1.4 million trading volume on the first day was significantly lower than Eric Balchunas's expected $12 million. This gap means that the actual performance only reached 11.7% of expectations, which is surprising for a “historically first Spot” DOGE ETF product.

The first-day trading volume is an important indicator of the success of an ETF, as it reflects the initial interest and liquidity base of the market. When the Bitcoin Spot ETF launches in January 2024, BlackRock's IBIT saw a first-day trading volume exceeding $1 billion, demonstrating strong market demand for the product. Although the first-day trading volume of the Ethereum ETF is not as high as Bitcoin's, the main product also reached several hundred million dollars in scale. In contrast, GDOG's $1.4 million seems negligible.

A more noteworthy comparison is the performance of the XRP ETF launched on the same day. On Monday, both Grayscale and Franklin Templeton launched their respective Spot XRP ETFs, with a total net inflow of $129.95 million according to SoSoValue data. The Franklin XRP ETF (XRPZ) had a net inflow of $62.6 million, while the Grayscale XRP Trust ETF (GXRP) saw a net inflow of $67.4 million. This means that the capital inflow into the XRP ETFs is nearly 93 times the volume of the DOGE ETF, creating a significant contrast.

This uneven market reaction reveals investors' true attitudes towards different cryptocurrencies. XRP benefits from Ripple's cross-border payment network, partnerships with financial institutions, and the recent victory in the SEC lawsuit, which provides fundamental support for its value. In contrast, while DOGE has a large community and cultural influence, it lacks clear technological innovation or commercial applications, and its value relies more on community sentiment and Elon Musk's tweets. Institutional investors clearly prefer the former.

First Day Performance Comparison

GDOG Volume: 1.4 million USD (Expected 12 million, Achievement Rate 11.7%)

XRP ETF Inflows: $129.95 million (93 times GDOG)

DOJE First Day Volume: 17 million USD (launched in September, indirect holding type)

REX Osprey DOJE's indirect holding strategy

It is worth noting that the REX Osprey DOGE ETF (DOJE) launched in September and is the first ETF in the United States to invest in DOGE. However, in order to enter the market more quickly, it has adopted a method that does not allow direct holding of cryptocurrencies. DOJE is registered under the Investment Company Act of 1940, which stipulates a 75-day approval window, but is limited to investing in offshore subsidiaries that hold DOGE and shares of European and Canadian DOGE ETFs.

Although this indirect holding structure accelerates the listing speed, it also incurs additional costs and tracking errors. When investors purchase DOJE, the funds must go through multiple layers of structure before ultimately being exposed to DOGE, with each layer incurring costs and efficiency losses. Furthermore, the valuation of offshore subsidiaries and overseas ETFs may deviate from the Spot price of DOGE, resulting in the NAV of DOJE not being able to fully track the movements of DOGE.

DOJE was more active in its debut in September, with the ETF achieving a trading volume of 17 million USD on its first day, surpassing analysts' expectations of 2.5 million USD. This success is partly attributed to its “first” status and the relatively optimistic market sentiment at that time. However, the subsequent performance of DOJE has not maintained this enthusiasm, and its AUM and daily trading volume have been relatively flat.

The DOGE ETFs from Grayscale and Bitwise are submitted under the Securities Act of 1933, which means they can hold the token directly, but the approval window is longer, at 240 days. Although this direct holding structure has a longer waiting time, it offers a purer exposure to DOGE, with less tracking error, and may be more favored by investors in the long run.

Can Bitwise BWOW's listing today reverse the trend?

Bitwise's DOGE ETF (BWOW) is expected to start trading on Wednesday, providing the market with a second opportunity to test the demand for DOGE ETFs. NYSE Arca, a subsidiary of the New York Stock Exchange, submitted filings to regulators on Tuesday to obtain approval and listing eligibility for the Bitwise Dogecoin ETF (BWOW). Bitwise stated that the management fee for the ETF is set at 0.34%, and for the first month after listing, no promoter fees will be charged for the first $500 million in AUM.

The success of BWOW may depend on several factors. First, whether the fee advantage can attract price-sensitive investors. A management fee of 0.34% is considered moderately low in the crypto ETF space, and coupled with the first-month promotion, it has a certain level of competitiveness. Second, the brand recognition of Bitwise. Bitwise is a well-known brand in the field of crypto asset management and has launched multiple crypto ETFs, and its professional image may attract some institutional investors. Third, whether market sentiment improves. If the price of DOGE rises around the listing of BWOW, it may drive investment enthusiasm.

However, the dismal debut of GDOG has cast a shadow over BWOW. The market may have already given a preliminary judgment on the demand for DOGE ETF: institutional interest is limited. If BWOW's trading volume on its first day is similarly lackluster, it will further confirm the lack of sufficient investment demand for DOGE ETF, which may become an “empty shell ETF” in the future.

100-Block ETF Supply Surge May Trigger Elimination Round

Balchunas stated on Monday that the recently launched DOGE and XRP ETFs are just the first batch, and he and ETF analyst James Seyffart estimate that “there could be more than 100 ETFs launched in the next six months.” This wave of supply poses a serious challenge to the entire crypto ETF market.

After the Securities and Exchange Commission relaxed listing standards in September, a surge of cryptocurrency ETFs has emerged. Asset management firms hope to test investor interest in products related to more speculative crypto tokens. However, the explosive growth in supply does not mean that demand can keep pace. When 100 ETFs compete for limited investment funds, most products will face liquidity exhaustion.

In terms of capital scale, the total AUM of the U.S. stock ETF market exceeds 8 trillion dollars, with about 80% of the funds concentrated in the top 100 products. The survival space for small ETFs is extremely limited. If crypto ETFs also exhibit a similar Matthew effect, then among 100 products, only 10-15 may obtain sufficient AUM and volume, while the rest will become “zombie ETFs.”

DOGE ETF is at a disadvantage in this competition. Compared to public chain coins like Solana, Avalanche, and Polkadot, which have technological innovations and ecological applications, DOGE's fundamental support is weaker. With limited funds, investors may prioritize allocating to technology-driven asset ETFs rather than meme-driven assets.

From another perspective, the failure of the DOGE ETF may sound the alarm for the entire shitcoin ETF market. Not all crypto assets are suitable for ETF creation, and not all ETFs can gain market recognition. Asset management companies need to more cautiously assess market demand when launching new products to avoid blindly following trends that lead to resource wastage. For investors, the lackluster performance of the DOGE ETF is also a reminder: do not blindly chase after products just because they are new; rational judgment should be based on fundamentals and actual demand.