- Multiple Ethererum ETFs launch today, but demand appears to be much lower than with Bitcoin
- Several global investment funds will open their doors to ETH ETFs at 9:30 am
- Analysts predict around a thirds of the interest levels shown in Bitcoin’s ETF
Multiple Ethereum ETFs are set to launch today, but there is little sign that uptake will be as strong as the Bitcoin ETFs. Several major investment firms, including BlackRock, Fidelity, and Franklin Templeton, are preparing to introduce their products, with market projections estimating demand to be between $3 billion and $4 billion, far less than the $17 billion that Bitcoin ETFs have garnered since their introduction in the US six months ago. In advance of the launch, Grayscale has shifted over $1 billion worth of ETH to Coinbase Prime, although this might not represent a definite sale.
Ethereum Demand Way Below Bitcoin
Filing companies found out last week that the last hurdle to their Ethereum ETFs had been cleared, meaning it was only a matter of taking care of the last pieces of administration before a launch:
It’s official: Spot Eth ETFs have been made effective by the SEC. The 424(b) forms are rolling in now, the last step = all systems go for tomorrow’s 930am launch. Game on. pic.twitter.com/9MaBDBA8co
— Eric Balchunas (@EricBalchunas) July 22, 2024
There are differing opinions on the potential success of these ETFs, however. Wintermute, a notable algorithmic trading firm, suggests that Ethereum ETFs might only attract up to $4 billion in inflows over the next year, a figure lower than the $4.5-$6 billion expected by most analysts. This is also significantly less than the $17 billion that Bitcoin ETFs have garnered since their introduction in the U.S. six months ago.
Despite the tempered expectations, Wintermute does foresee the price of ETH benefiting from the inflows, indicating a 24% price rise as a result. Issuers such as BlackRock, Fidelity, Grayscale, VanEck and Franklin Templeton will open their doors to buyers today.
Lack of Staking Could Hinder Growth
A key regulatory decision impacting these ETFs is the denial of issuers’ requests to allow staking of the crypto assets they hold. This capability would have generated additional income for investors, enhancing the attractiveness of ETFs compared to direct holdings where staking benefits remain available.
Wintermute’s report highlights this loss as a competitive disadvantage for Ethereum ETFs and shows that the Securities and Exchange Commission (SEC) still considers some aspects of the Ethereum ecosystem aligned with the Howey Test for Securities.
Research firm Kaiko also shares a cautious outlook, noting in a report that previous Ethereum-focused launches, such as futures-based ETH ETFs in the U.S., were met with underwhelming demand. Kaiko pointed out that the success of these spot ETFs will be closely watched, with initial inflow numbers being critical to ETH’s price movement. Data from Kaiko indicates a sharp increase in ether implied volatility, suggesting market uncertainty around the ETF launch, as traders hedge their positions.
Grayscale Shifts $1 Billion
One outfit definitely not being cagey in the opening stages is Grayscale, which has transferred $1.01 billion worth of ETH to Coinbase Prime. Grayscale launched its Ethereum Trust in December 2017, since when it has accumulated $10 billion worth. Contrary to speculation that Grayscale might be preparing for a sell-off to reinvest in other cryptocurrencies like Solana, Jon Campagna, managing partner at Nexyst Digital, dismissed these claims.
Campagna told Decrypt that the transfer is part of Grayscale’s plan to allocate 10% of its ETHE holdings into its new Ethereum ETF, set to go live on Wednesday. ETHE holders will receive proportional positions in the new ETF, providing a more cost-effective investment option with a lower fee structure.
Grayscale’s decision to transfer a significant portion of its holdings to Coinbase Prime aligns with its strategy to keep assets within its ecosystem. Despite this, Grayscale is maintaining a 2.5% fee on ETHE, a rate significantly higher than the competition. Eric Balchunas, an ETF analyst at Bloomberg, noted that this fee is ten times higher than other available options, which might impact the outflows from ETHE as investors seek lower-cost alternatives.
Regardless, Balchunas noted the importance of an Ethereum ETF and how it adds to the swell of acceptance of cryptocurrency as a legitimate asset class:
Regardless of your feelings about ether or crypto, this kind of first class TradFi treatment (translating benefits into Boomer-ese and and delivering it in the most preferred inv vehicle on Planet (the ETF) is a major deal. These issuers have over $15T in collective aum. pic.twitter.com/uXR1AL1BxX
— Eric Balchunas (@EricBalchunas) July 22, 2024
