Will Spot Ethereum ETFs Live Up to Their Hype? Analysts Speak Out

Analysts believe that Ethereum ETFs will likely have a smaller market impact than Bitcoin ETFs.

With Ethereum exchange-traded funds (ETFs) set to launch this month, experts disagree on what the funds’ debut will mean for markets.

Analysts are divided on whether the launch will have the same impact as spot Bitcoin ETFs, with the price of BTC surging 58% in the nine weeks since the funds launched to its current all-time high of $73,738.

While some observers predict that the launch of Spot Ether ETFs will be a groundbreaking event, others anticipate that the funds will debut with more buzz than noise.

How will Ether ETFs compare to Bitcoin ETFs?

Ryan Lee, chief analyst at Bitget Research, told The Defiant that Ethereum ETFs will likely see lower trading volumes compared to Bitcoin ETFs.

“Bitcoin and Ethereum are two assets with different fundamentals and distinct commercial appeal,” he said. “When Ethereum ETFs begin trading, ETH will capture about 2.5% of its market cap. If this bullish scenario plays out, the Ethereum spot ETF could see $11.55 billion in AUM.”

Galaxy Research also predicts that inflows will arrive at a slower pace for spot Ethereum ETFs compared to their Bitcoin counterparts.

“We estimate that spot Ethereum ETPs will generate approximately $5 billion in net inflows in the first five months of trading,” said Charles Yu, vice president of research at Galaxy. wrote.

However, many observers have bullish expectations for the price of Ethereum once the ETFs are launched.

Research on shorthand predicted that ETH could potentially reach at least $6,500 later this year after the launch of Ether ETFs, breaking ETH’s previous all-time high by 33%.

Standard Chartered offers an even more optimistic forecast, suggesting that the approval of Ethereum spot ETFs could generate up to $45 billion in inflows in the first 12 months, potentially pushing the price of ETH to $8,000 by the end of 2024.

Others, like Jupiter Zheng, a partner at HashKey Capital’s Liquid Fund, expect news of the ETF launch to trigger a brief, modest rally, followed by a strong “sell the news” event.

Ethereum ETFs Exclude Staking

Analysts say the lack of staking rewards in ETF filings is one factor dampening enthusiasm.

Since September 2022, Ethereum has leverage Proof of Stake consensus to derive security from staking. Node operators must lock up at least 32 ETH as collateral to participate in validating transactions and securing the network. In exchange, stakers receive a share of the newly created ETH as a reward.

In May, BlackRock, Grayscale and Bitwise updated their SEC applications to withdraw staking provisions. These measures were taken following a dialogue between potential issuers and the SEC.

“Unstaked Ethereum carries an opportunity cost by forgoing the benefits of staking rewards, including inflation rewards, priority fees, and MEV revenue,” Lee said. “This opportunity cost makes spot Ethereum ETFs less attractive to crypto-savvy institutions… However, traditional investment institutions constrained by corporate regulations and legal frameworks can only gain exposure through ETFs and would not face the opportunity cost of staking.”

Fee waivers to attract institutional investors

To attract institutional investment, several ETF issuers have announced fee waivers for their Ethereum spot funds.

Franklin Templeton announced a 0.19% referral fee, but will waive it for the first $10 billion in assets for six months. Similarly, VanEck announced a 0.20% referral fee, which will be waived for the initial $1.5 billion until an unspecified date in 2025.

It should be noted that BlackRock and Fidelity have not yet disclosed their fees.

Meanwhile, the highly anticipated launch of Ethereum spot ETFs has faced delaysAnalysts had initially expected approval by July 2, but the U.S. Securities and Exchange Commission (SEC) asked issuers to submit revised documents by July 8.

In this regard, Nate Geraci, co-founder of the ETF Institute, predicted The funds will be launched during the week of July 15.

THE ETH price is up 1.2% over the past 24 hours, according to CoinGecko.

Related: Data Contradicts the Narrative: Ethereum Continues to Dominate Layer 1 Industry

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