Key Points
Analysts believe that the newly approved Ethereum ETFs in the US might not garner as much demand as spot-Bitcoin products, as reported by Bloomberg. Major financial firms like BlackRock and Fidelity are awaiting final approvals from the Securities and Exchange Commission (SEC) to list these anticipated Ethereum funds.
However, strategists from JPMorgan predict that Ethereum ETFs will experience much smaller net inflows compared to the $15.3 billion that flowed into Bitcoin vehicles this year.
Views on Ethereum ETFs’ Potential
The report suggests that the success of the five-month-old Bitcoin ETFs can be attributed to the controversial narrative that presents Bitcoin as digital gold, a concept that Ether lacks. The Ethereum funds will also not offer staking rewards for blockchain maintenance, a feature available to those who hold the token directly.
Caroline Bowler, CEO of BTC Markets Pty, points out that Ether does not have the same profile as Bitcoin. Bitcoin’s market value of $1.4 trillion is three times larger than Ether’s, indicating that the impact of Ethereum ETFs in the US may not be as significant.
In a surprising move, the SEC recently showed its willingness to approve spot Ethereum ETFs, following its earlier acceptance of Bitcoin funds due to a court reversal in 2023. Despite this development boosting Ether’s price, its 109% gains over the past year still fall behind Bitcoin’s 169% surge, which included a record high in March.
Strategists at JPMorgan, led by Nikolaos Panigirtzoglou, estimate that prospective Ether portfolios will attract a “modest” $1 billion to $3 billion in net inflows for the remainder of the year.
However, Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, reports that these products may struggle to capture 20% of the current $62.5 billion Bitcoin ETF assets in the US.
Despite these concerns, Vetle Lunde, a senior research analyst at crypto specialist K33 Research, remains optimistic. He predicts $4 billion worth of net inflows in the first five months for the Ethereum ETFs and a significant “supply absorption shock” that could boost ETH’s price.
Fund manager VanEck, which plans to launch an Ethereum ETF, sees potential in the popularity of the Ethereum blockchain underlying the token, especially for applications in crypto financial services.
Matthew Sigel, VanEck’s Head of Digital-Asset Research, believes that investors will eventually recognize the greater potential for application and innovation within the Ethereum ecosystem than Bitcoin.
The launch of nine new US ETFs for Bitcoin on January 11 initially caused a decline in Bitcoin’s price, along with outflows from the Grayscale Bitcoin Trust. However, the strong demand for the new ETFs eventually overshadowed these concerns, and Bitcoin resumed its upward trajectory.
Similarly, asset manager Grayscale plans to convert its $11 billion Ethereum offering into an ETF, similar to its Bitcoin fund. While redemptions from the Grayscale fund may create selling pressure on ETH, the overall market impact remains unclear.
At the time of writing, ETH was trading at $3,830, while Bitcoin continues to approach its record levels of $73,7000 reached in March. Ether is still some distance away from its all-time peak of $4,866, achieved during the 2021 bull run.
