The debut of the Grayscale DOGE ETF was cold; what are the reasons behind it?

Author: Blockchain Knight

On November 24, Grayscale's Dogecoin ETF (GDOG) was listed on the NYSE Arca, but faced a “cold opening.”

On the first day, the secondary market trading volume was only 1.41 million USD, far below the 12 million USD predicted by Bloomberg analysts, and the net inflow of funds was 0, indicating no new capital was injected into the ecosystem. This performance starkly reveals that the market's demand for regulated products has been severely overestimated.

The cooling of GDOG stands in stark contrast to the successful cases during the same period. The Solana ETF (BSOL), launched in late October, attracted $200 million in funds during its first week, primarily due to its practical attribute of staking yields, providing traditional investors with an investment mechanism that is difficult to participate in directly.

GDOG only provides exposure to social sentiment and, as an ordinary spot product, its underlying assets have become widespread on retail platforms like Robinhood, lacking “access premium” and yield support, which limits its attractiveness to institutions.

In addition, the characteristics of MEME itself bring additional risks. Although Dogecoin has a daily trading volume of 1.5 billion dollars, it is prone to severe fluctuations driven by events.

At the same time, creating large positions requires purchasing a massive amount of DOGE, which may drive up the spot price; if the crypto market crashes during the ETF trading halt, the price may significantly deviate from the net asset value after resuming trading. These risks lead traders to view GDOG as a short-term trading tool rather than a long-term allocation asset.

The cold reception of GDOG is not an isolated incident, but a warning of industry oversupply. In the next six days, five spot crypto ETFs will be launched (including products related to Chainlink and XRP), with over 100 single-token ETFs expected to be introduced in the following six months.

However, the current market environment is extremely adverse. As of the week ending November 24, net outflows from digital asset investment products amounted to $1.94 billion.

This mismatch of supply and demand conceals structural risks. If even high-profile MEME assets like Dogecoin cannot attract subscriptions, the prospects for low liquidity assets' “long tail ETFs” look even bleaker.

A large number of low-scale “zombie ETFs” will dilute market liquidity, increase the inventory management difficulties for market makers, and may lead to wider spreads and increased tracking errors during periods of volatility.

The performance of GDOG over the next two weeks will serve as a litmus test for the industry. If “zero new additions” continues, it indicates that the product is only eating into existing demand rather than creating new inflows, which could force issuers to slow down the launch pace of the 100 ETFs, or even trigger channel consolidation.

Despite the infrastructure and regulatory approval for cryptocurrency ETFs being in place, investors are choosing to exit in the current sluggish environment, and the previously frenzied issuance boom urgently needs to return to rationality.