Traders’ positions indicate a moderate level of excitement surrounding the upcoming launch of spot Ethereum ETFs. Despite a relatively uneventful week, K33 research suggests that these funds could potentially follow a similar explosive path to Bitcoin ETFs. The research firm projects that approximately $4 billion could flow into spot Ethereum ETFs within the first five months of their launch.
The introduction of Ethereum-based exchange-traded funds in the United States is expected to attract significant inflows. K33 Research’s latest report indicates that these ETFs could see inflows of around $4 billion within the initial five-month period. The report also highlights the comparison between assets under management in existing Ethereum-based exchange-traded products globally and similar Bitcoin products. It also analyzes the open interest in futures contracts on the Chicago Mercantile Exchange (CME), which caters to institutional investors.
While the current open interest in ETH futures on the CME is 23% of the size of BTC futures, the average share of ETH futures has been around 35% of BTC futures since their introduction in 2021. This suggests a significant institutional demand for Ethereum exposure in the US market. The approval of spot Bitcoin ETFs led to a significant rally in the price of Bitcoin, and the introduction of Ethereum ETFs could potentially see ETH outperforming BTC after a period of lagging behind.
Bloomberg ETF analyst Eric Balchunas predicts that spot Ethereum ETFs will attract between 10% and 20% of the inflows witnessed by the Bitcoin ETF. He emphasizes that managing expectations around Ethereum spot ETFs is crucial and that even capturing 20% of the inflows seen by Bitcoin ETFs would be considered a successful launch by normal ETF standards.
The spot Ethereum ETF applicants have strategically removed parts from their filings that would have allowed staking of the fund’s assets. This move is likely aimed at appeasing the Securities and Exchange Commission’s (SEC) concerns, as the SEC views staking as potentially constituting unregistered securities. The regulator has previously taken action against crypto platforms offering staking services to US customers. It is interesting to note that in Canadian Ethereum ETFs, 99% of assets under management do not involve staking, while in European products, the corresponding figure stands at 98%.
The anticipated launch of spot Ethereum ETFs in the US market has the potential to attract significant inflows, drive institutional demand for Ethereum exposure, and potentially lead to ETH outperforming BTC. Managing expectations around these ETFs, navigating regulatory challenges, and analyzing market trends will be crucial in assessing the impact of Ethereum ETFs on the broader market.
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