Markets
Ethereum ETFs are coming. Can they revive lukewarm crypto markets?
Gary Gensler, chairman of the SEC, is not one to reveal his cards, but yesterday still gave a forecast as optimistic as expected on Ethereum ETFs, Speaking at the Bloomberg Invest conference. Between his usual frosty statements about the crypto industry, including accusing his interviewer of chasing “clicks,” Gensler said the process of working with issuers was “going smoothly.”
Gensler’s rare nod appears to confirm Bloomberg’s predictions the soothsayers that ETFs could be launched as early as July 2. With crypto assets ranging from Coinbase to Bitcoin crater In recent days, could the arrival of an Ethereum ETF reinvigorate the bull market? After all, approval and launch Bitcoin ETFs in January served as a catalyst for the current rally.
The short answer is: probably not. Ethereum has always been Bitcoin’s less popular little brother, even with its new smart contract capability, improved transactions, staking, and many other advantages. It’s been years since anyone predicted flipping, that legendary day when Ethereum will overtake Bitcoin, with a straight face.
I met with Christopher Perkins, president of venture capital firm CoinFund, who told me that one of Ethereum’s main challenges would be branding. Bitcoin is easy. The proto-cryptocurrency boasts the nickname “digital gold,” which any investor can understand. A baby boomer looking to allocate the millions of dollars earned from selling a house he bought in 1970 for $10,000, however, might have a harder time understanding Ethereum’s value proposition. What exactly is a smart contract and why should we care? “These baby boomers, with money, they don’t ape things,” Perkins told me.
Even with the hype around the Bitcoin ETF, we are seeing slow adoption as investors become more comfortable with the new asset class. As Perkins said, ETFs offer two main benefits: regulatory certainty combined with operational scalability or an enhanced user experience. Bitcoin, thanks to its early commodity designation, has never really been in a regulatory gray area, although ETFs have made it easier for people to buy them directly in their brokerage accounts, rather than setting up an account Coinbase or Robinhood. However, with Ethereum, the approval and launch of ETFs truly creates a security gap that did not exist before, especially after months of speculation that the SEC would reject the applications.
Additionally, a yield-providing Ethereum ETF could be a game-changer, if the SEC ever approves them. Last year, Perkins led a project to provide a benchmark rate for staking returns on Ethereum, which he pointed out is often higher than Treasury rates, when adjusted for inflation. “The ETF is going to be very important, but it’s also imperfect because it’s going to deprive investors of that return right from the start,” he said.
The story continues
So if Ethereum ETFs finally arrive next week, or soon after, don’t expect a surge in adoption. But Perkins said there needs to be a long-term view: “This is just another step in integrating and reducing regulatory risks. »
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
This story was originally featured on Fortune.com