Ethereum ETFs Make a Comeback
ETFs tracking the second-largest cryptocurrency,Ether, dominate the Canadian top performers for the week ending July 8th.
Ethereum ETFs led last week’s top performers, driven by a public test network transitioning to proof of stake. On the end of the spectrum, precious metals ETFs take a hit from a surging U.S. Dollar.
Ethereum back on the rebound
Ethereum, similar to most cryptocurrencies, follows a mechanism known as Proof of Work (PoW). It involves different computers connected to the chain competing to validate network transactions. This is analogous to holding a race to see who is the quickest to package transactions and solve mathematical problems, which requires significant computing power and energy. More recently, Ethereum decided to switch to a new process called Proof of Stake (PoS), which removes the competitiveness from the equation. In contrast to PoW, the validation system relies on a network of participants, also known as nodes, entering a lottery for the chance to verify the transactions while requiring collateral. The process effectively prevents fraudulent transactions from devaluing the cryptocurrency and costing the node its stake. On Wednesday, the second of three Ethereum public network tests, Sepolia, successfully transitioned to PoS, which lifted investors’ sentiment. The two versions of the Purpose Ether Yield ETF (ETHY.B) and (ETHY.U) outdid the 20 top-performing ETFs in Canada, having jumped 22.69% and 22.57% last week.
Similarly, the CI Galaxy Ethereum ETF (ETHX.B) came in third on the top performers' list, having risen 22.42%. The CAD (ETHH.B) and Carbon Offset Non-FX Hedged (ETHH.J) versions of the Purpose Ether ETF placed fourth and fifth, both generating 22.39%. The list of the top 20 performing Canadian ETFs was dominated by ETFs tracking Ethereum except for four offerings tracking disruptive innovation and genomics by Emerge Canada. The Emerge ARK Genomics & Biotech ETF’ USD (EAGB.U) and CAD (EAGB) posted 19.34% and 19.10% gains last week, while Emerge ARK Global Disruptive Innovation ETF’s USD (EARK.U) and CAD (EARK) generated 17.63% and 17.40% in returns.
ETFs in play:
Strong dollar hurts precious metals
The United States Dollar hits its highest, reaffirming its position as a safe haven for investors worried about a receding economy. This has rendered precious metals such as gold and silver less appealing as a sharp rally in the dollar, and consistent rate hikes sapped investors’ appetite for the non-yielding asset. Out of the 20 bottom-performing ETFs last week, 14 track gold and silver. The Horizons Gold ETF (HUG) lost the least amongst its peers, managing to lose only 3.16% last week. The Purpose Gold Bullion Fund ETF (KILO) went down 3.68%; meanwhile, the Purpose Silver Bullion Trust ETF (SBT) lost the most amongst ETFs tracking the precious metals, with the ETF plummeting 6.62% over the last week.
ETFs in play:
Data for this article is as of July 8th, 2022.
