Markets
Spot Ether (ETH) ETFs Could See Demand From Same Sources As Bitcoin (BTC) Versions, But On A Smaller Scale: Bernstein
Ether (ETH) Cash exchange-traded funds (ETFs), once approved for trading, will likely see the same sources of demand as bitcoin (BTC) ETF but on a lower scale, broker Bernstein said in a research report on Monday.
“ETH is unlikely to see as much conversion to spot ETH due to the lack of an ETH staking feature in the ETF,” wrote analysts Gautam Chhugani and Mahika Sapra, adding that basis trading will likely find takers over time and that should contribute to healthy liquidity in the ETF market. Basis trading involves buying the spot ETF and selling the futures contract at the same time and then waiting for prices to converge.
Spot Ether ETFs are about to become available to investors in the United States after the Securities and Exchange Commission (SEC) approved key regulatory filings for issuers last month.
“ETH, as a leading tokenization platform, is developing a strong use case, both for stablecoin payments, as well as for tokenization of traditional assets and funds,” the authors wrote.
Ether and other digital assets need a “more improved regulatory regime,” and Bernstein expects the narrative to improve as the U.S. election approaches later this year, as the odds of a Republican victory continue to improve and because Trump is now pro-crypto.
“Despite the recent decline in cryptocurrency markets, the “structural adoption cycle remains intact,” the report adds.
Wall Street giant JPMorgan said ether spot ETFs would likely see much weaker demand than bitcoin ETFs, noting that the world’s largest cryptocurrency has a first-mover advantage and could potentially saturate overall demand for crypto exchange-traded funds, it said in a report last month.