Last week, U.S. regulators gave final approval for spot exchange-traded funds (ETFs) that hold Ethereum blockchain’s ether (ETH) cryptocurrency.
Cryptocurrency watchers hail the move as a pivotal moment for the digital asset sector. Like it did with Bitcoin ETFs, ETH ETFs will make the ETH crypto more accessible to traditional investors. This approval gives legitimacy to the second biggest crypto, and should boost investor confidence.
Some of the crypto experts we spoke to expect ETH ETFs to mirror the success of Bitcoin ETFs. They believe ETH ETFs will have the same impact on the market as Bitcoin ETFs.
“Individuals and institutions are looking for ways to do allocations into digital assets and these ETFs provide a safe and familiar way for them to do so,” says Justin Newton, CEO, Netki Inc. “Like it did for Bitcoin, this will provide some additional stability to ETH pricing as well as an influx of capital that will provide a natural floor to the price of the asset.”
ETH is not BTC
Most of the market watchers we spoke to unanimously hailed the launch of ETH ETFs. But they were quick to dismiss any comparisons to BTC ETFs.
“There is optimism about the potential performance of Ethereum ETFs, with projections reaching $2-4 billion in assets within their first year of trading,” says Vivien Lin, chief product officer, BingX. “However, they are expected to attract only about 10-20 percent of the demand seen by Bitcoin ETFs, which is understandable given Ethereum’s smaller market cap and the absence of exposure to staking yield.”
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Bundeep Singh Rangar, CEO, Fineqia International Inc, believes while Bitcoin ETFs gained substantial popularity due to Bitcoin’s established status as the reserve currency of the digital economy and its reputation as a digital store of value, ETH ETFs might experience a different trajectory.
“Ethereum, while highly valuable and known for its smart contract capabilities, is less recognized and understood by the broader market compared to Bitcoin,” says Rangar. “As a result, although ETH ETFs will be highly valued, they might not attract the same level of assets under management (AUM) as quickly as Bitcoin ETFs did.”
Aleksander Grandwilewski, head of education, Decentralized Masters, agrees. He says Bitcoin is often seen as digital gold or digital cash, which is a straightforward concept for most people to grasp.
“Ethereum, on the other hand, is a more complex platform that supports programmable money and decentralized applications,” says Grandwilewski. “This complexity can make it harder for laypersons and retail investors to understand and get excited about Ethereum ETFs.”
Grandwilewski believes people who do understand Ethereum prefer to hold ETH natively. This way they can reap the benefits of self-custody, such as access to DeFi opportunities.
Reading the market
Taking a different view, Eugene Cheung, head of institutions, Bybit, believes there’s a strong indication that ETH ETFs could follow a similar path to BTC ETFs.
He expects the increased interest in ETH by institutional investors will drive its price up in the long term. He acknowledges that ETH is currently less understood and a younger asset compared to BTC. But its diverse use cases and the potential incorporation of its native yield in ETFs could help it outperform BTC.
“In the short term, I expect that 30 percent of BTC flows might shift towards ETH,” says Cheung. He believes investor education and regulatory clarity combined with favorable macroeconomic conditions will drive up interest.
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“This long-term bullish catalyst indicates that ETH could offer significant diversification benefits and a compelling risk/reward ratio, with potential price doubling within the next 18 months,” says Cheung.
Rising tide
Pointing to Bitcoin ETFs that had record breaking trading numbers, Lin says the two ETFs present strong arguments for the integration of crypto into existing systems to enhance, innovate and diversify the investor experience.
Newton believes ETH ETFs will have a positive impact on the cryptosphere, as it provides further legitimacy to the ecosystem. It does so both through the regulator approval, and due to the brand affiliation with the institutions offering the ETF’s.
“It will provide additional positive visibility to ETH and the broader ecosystem as people learn about digital assets through their traditional financial advisors, planners and other service providers,” says Newton.
Rangar agrees and says following the launch of Bitcoin ETFs, companies like MicroStrategy and Tesla made significant investments in Bitcoin. “Similarly, ETH ETFs could lead to increased institutional participation in the Ethereum ecosystem, driving innovation and development,” says Rangar.
Terence Kwok, founder & CEO, Humanity Protocol, expects the launch of ETH ETFs to increase competition in the crypto market. This will happen as financial institutions develop a wide range of Ethereum-based products.
“Just as Bitcoin ETFs led to a surge in related offerings, ETH ETFs are likely to inspire new investment vehicles, such as spot ETFs, futures-based ETFs, and leveraged ETFs, each targeting different investor profiles,” says Kwok. “This proliferation of options can fragment investor attention and capital, leading to intense competition among financial products vying for market share.”
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