Bitcoin
Ether ETFs Are Coming. Wall Street Is Divided on Their Impact
- Reports say spot ether ETFs could launch as early as July 22.
- Wall Street analysts are divided on what the impact will be for ether.
- Most are looking at the volume of inflows into new ETFs to determine the impact on the price of ether.
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To see ether Exchange-traded funds are on the horizon, and the historic debut should mark another major victory for the cryptocurrency industry.
But what this could mean for the token itself is less clear.
Wall Street has issued a number of outlooks on how the world’s second-largest cryptocurrency will move once ETFs are launched. According to Reuters, trading could start on Tuesday, July 22nd.
Even before the Securities and Exchange Commission approved the funds in May, optimism about their creation bred optimism.
Since March, Standard Chartered has projected that ether will hit US$8,000 by the end of the year. The bank expects these funds to generate between $15 billion and $45 billion in ether inflows over a 12-month period.
With ether trading at just under $3,500 on Friday, this indicates upside potential of over 130%.
Bulls derived their confidence of how bitcoin behaved after the launch of its spot ETFs in January. With money coming into these funds by the beginning of 2024, the Apex token has risen by more than 73%, reaching an all-time high of US$ 73,780 in March.
However, opinions are divided on whether this boost will materialize for ether.
Ether ETFs will likely see only a fraction of bitcoin’s inflows, JPMorgan noted, as Nikolaos Panigirtzoglou wrote in late May.
Citi made a similar prediction this month, anticipating that ETF inflows will account for 30%-35% of what bitcoin has achieved. That amounts to $4.7 billion to $5.4 billion over the next six months, the report said, cited by Coin table.
To support this, both banks highlighted some of the same factors. They noted bitcoin’s first-mover advantage and emphasized that the ether token offers functionality that would not be accessible through ETFs, thus limiting demand.
For example, ETF investors will not be able to access ether staking, a function in which the token is locked in exchange for a yield.
However, others find these predictions too pessimistic. At the end of June, Shorthand research Ether is projected to hit $6,500 this year on strong inflows:
“The market outlook for upcoming Ethereum spot ETFs is overly pessimistic. We anticipate a net inflow of $15-$20 billion in the first year as Ethereum has qualities that appeal to Wall Street,” the firm said. “This should significantly boost its value, not only in dollar terms but also relative to Bitcoin.”
Sources who spoke to Reuters also noted that ether’s liquidity is much more limited than bitcoin’s, in part due to yield constraints.
According to Galaxy Digital, this makes the ether more price-sensitive entry. In other words, the token could still see considerable gains without matching the inflows into spot bitcoin funds.
“Despite the uncertainty surrounding the reception of the ETH ETF, capturing 10-20% of Bitcoin ETF inflows could propel ETH above 4,000, approaching its peak of 4,800,” QCP Capital posted on Telegram in mid-June.
Supply considerations are one of the main reasons why SynFutures CEO Rachel Lin predicted that ether could skyrocket to $22,500 this cycle. In a May note, she noted that ether’s supply has remained at 120 million since 2022, while bitcoin’s supply has continued to grow.
But whatever impact net inflows and supply may have on ether’s price in the coming months, the immediate impact of ETFs could disappoint investors, some say.
“Price movement will be limited in the first few days as there will be a slow rotation of crypto exchange ETFs rather than rapid inflows,” FxPro senior market analyst Alex Kuptsikevich told Business Insider.
He added: “But look at it more broadly – it’s only the second cryptocurrency that can be easily added to investors’ portfolios. In the first few months after the ETF launch, Ethereum’s relative weighting could increase.”