Ethereum
Spot Ether ETFs Set to Debut Tuesday – What It Means for the Ethereum Blockchain
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Spot Ether ETF Applications
Grayscale Ethereum Mini Trust (ETH)
Grayscale Ethereum Trust (ETHE)
Ethereum at the Bit Level (ETHW)
Ethereum VanEck (ETHV)
21 Basic Ethereum (CETH) Stocks
Invesco Galaxy Ethereum (QETH)
Fidelity Ethereum (FETH)
Ethereum Franklin (EZET)
iShares Ethereum Trust (ETHA)
Like bitcoin spot ETFs which launched in JanuaryMost of them waive fees initially, in many cases for up to a year.
By the standards of ETF launches, bitcoin spot ETFs have been a success: they recently surpassed $17 billion in net flows year to date since their debut.
For a new asset class, this is a real success.
However, with $1.3 trillion in total assets, bitcoin is about three times more valuable than ether, which has about $414 billion in assets. This could limit the initial appeal of ether ETFs.
Bitcoin prices have been rising ahead of the launch of Bitcoin spot ETFs. Ether has been a bit more erratic, rising 50% in 2024, but most of the rally has come in the first three months of the year.
However, for Ethereum enthusiasts, the main value of an ether spot ETF is that it is a perfect vehicle to educate the public about Ethereum’s use cases, which are far greater than anything Bitcoin has to offer.
Ben Johnson, head of client solutions at Morningstar and a veteran of ETF research, noted that while bitcoin is often touted as digital gold, “Ethereum is more like picks and shovels.”
“The argument for the former is that it is finite and could be a store of value, the latter is not finite and is used to build real-world applications,” he said.
Many investors have never been impressed by Bitcoin, mainly because its use seems limited: it is a purely digital currency. But the Ethereum platform is different.
Bitcoin and Ethereum both use blockchain, which is a decentralized, immutable ledger to record transaction history, but they have very different goals.
Bitcoin uses blockchain as its digital currency. Ethereum uses digital currency just like Bitcoin, but its blockchain has broader purposes. (Ether is the cryptocurrency used in the Ethereum network, but in practice, the terms Ethereum and ether are often used interchangeably.)
Ethereum is a platform for creating smart contracts, which are self-executing programs that enforce a pre-existing contract or agreement. This can be as simple as “If I do this, you do that.” The gist is that they execute automatically, are performed on the blockchain (the Ethereum network), and produce the same result every time they are executed. They also have a wide variety of applications.
The most common use is decentralized finance, or “DeFi.” It’s just a fancy term for running financial services on the blockchain. In theory, you could do almost any banking service: users could send, lend, or borrow money, open a savings account, trade stocks or derivatives or other cryptocurrencies, buy insurance. In theory, you could also do real estate transactions. Users can perform these functions using software called “decentralized applications.”
The use cases extend beyond financial services. Users can play games. Companies could use it to track supply chains. It could even be used as a clearing platform to settle stock trades.
Another application of Ethereum is stablecoins. These are cryptocurrencies whose value is tied to another asset, usually the dollar. Since cryptocurrencies like bitcoin and ether are volatile, many DeFi applications rely on stablecoins for lending, borrowing, and trading.
The Promise is a transaction network that, in theory, could be a much cheaper and faster way to do business.
It remains unclear whether this latest development will open the floodgates to more crypto ETFs, nor whether the U.S. Securities and Exchange Commission will find a way to stop this potential tidal wave.
Any applicant for other crypto ETFs would still have to demonstrate that the underlying market has not been subject to manipulation, a crucial requirement for approval of such funds.
But much will depend on the political climate.
Historically, for commodities, the SEC has traditionally required a regulated futures market to trade alongside the asset. Currently, this only exists for bitcoin and ether, so it would take time to develop futures markets for other crypto products.
“Under the current regime in Washington, that wouldn’t change,” Matt Hougan, Bitwise’s chief investment officer, told me. “But if there’s a regime change in Washington, that could change.”
Either way, expect a lot of trading. “These new ETH ETFs are probably going to be heavily traded,” Morningstar’s Johnson told me. “My guess is that if and when options on these ETFs become available, this is going to get really heated… These ETFs effectively add a whole new wing to the crypto casino.”
For now, selling Ethereum as a new transaction platform is the main issue, and Ethereum enthusiasts have a strong argument: the platform is first and foremost a technology investment.
“Many investors view bitcoin as digital gold, a store of value, while investors view Ethereum more as a technology play,” Bitwise CEO Hunter Horsley said on CNBC TV last night.
Note: Jan van Eck, CEO of VanEck, Ben Johnson of Morningstar and David Mann, ETF Products and Capital Markets at Franklin Templeton, will be on ETF Edge on Tuesday, July 23 at 1:10 p.m. EST. ETFEdge.cnbc.com.