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Why Ethereum ETF Demand Will Disappoint Crypto Investors – DL News
- Spot Ethereum ETFs are expected to launch on Tuesday.
- They could only get 10-12.5% of the assets earned by Bitcoin ETFs.
- The lack of a staking mechanism is one of the main reasons why investors might not rush to gain exposure to the funds.
Spot Ethereum exchange-traded funds will likely launch in the United States on Tuesday, potentially opening the floodgates to a new wave of crypto ETF enthusiasm.
However, not everyone believes that Ethereum ETFs will be as popular as the Bitcoin ETFs launched in January.
Wintermute, Crypto Market Maker wrote On Monday, he expected Ethereum ETFs to generate between $3.2 billion and $4 billion in assets in their first year.
The firm expects Bitcoin ETFs to raise about $32 billion by the end of the year, meaning Ethereum ETFs would only receive about 10% to 12.5% of the amount of assets that Bitcoin ETFs are expected to receive.
In this scenario, Ether’s price could potentially increase by 18 to 24 percent, Wintermute said, pushing the second-largest cryptocurrency to $4,200. A new high for 2024, but still below Ether’s 2021 all-time high of $4,800.
“This conservative estimate is impacted by the lack of a staking mechanism, which could diminish Ethereum’s appeal as an ETF investment vehicle,” Wintermute said in the report.
Staking is a process by which Ether investors can lock their holdings into the network and earn a 3% yield, paid in Ether.
In their current form, Ethereum ETFs will not provide investors with exposure to this yield, which could deter them from seeking out these investment vehicles.
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Additionally, ETF holders also have to pay management fees, which range from 0.15% to 2.5%.
“Even paying 0.2% without the staking element seems like a non-starter to me,” said Adam Morgan McCarthy, an analyst at Kaiko Research, a crypto data firm. DL News.
Wintermute said it would revise its expectations if the US presidential election resulted in a change in leadership at the Securities and Exchange Commission — which would open the door for Ethereum ETFs to implement staking functionality.
Bloomberg Intelligence ETF analysts Eric Balchunas and James Seyffart, meanwhile, said that Ethereum ETFs could garner between 15% and 25% of the assets that have flowed into Bitcoin ETFs.
This expectation — in part depending on demand that Hong Kong Ethereum ETFs have experienced relative to Hong Kong Bitcoin ETFs — would mean that U.S. Ethereum ETFs would accumulate between $4.8 billion and $8 billion in a year.
Tom Carreras is a markets correspondent for DL News. Got news on Ethereum ETFs? Contact us at tcarreras@dlnews.com