Exchange-traded funds for spot ethereum (ETH-USD) are anticipated to open for trading on Tuesday, July 23. As many supporters have predicted, the much awaited launch is set to propel ether’s price to unprecedented heights, but traders in the cryptocurrency market seem to be underestimating the full impact.
In fact, ether (ETH-USD) fell 1.3% from a month ago as of Friday midafternoon trade. However, it has still increased by about 49% this year despite a larger surge in the prices of key tokens. Seeking Alpha analyst Richard Durant ascribed the company’s low performance in the current cycle to “competition, scaling problems, or [tighter] monetary policy.”
The U.S. Securities and Exchange Commission authorized fundamental regulatory requirements for potential ETF issuers that want to invest straight into ether (ETH-USD) in May. However, before the products are made available to the public, the regulator must still accept the applicants’ S-1 registration applications. Huge players in the financial space, including VanEck, Ark financial Management, and BlackRock (BLK), are vying for the crucial first-mover advantage in the race to launch a spot ETH ETF.
Darius Tabai, the CEO of Vertex and a veteran trader at Merrill Lynch and Credit Suisse, stated that the introduction of an ETH ETF would be a validation boost for the cryptocurrency ecosystem at a time when the sector is attempting to assess the possible impact of U.S. elections later this year.
He continued, “Given the uncertainty surrounding both developments, it feels like the market is not fully pricing in the impact of the ETF,” and “if a spot ETF is approved, we could easily see price gains of 25%+.”
Any post-approval price gains would probably have a greater direct influence on the decentralized finance (DeFi) ecosystem because ether (ETH-USD) is the primary smart contract platform in the cryptocurrency space, he said. “I would anticipate a potential halo effect for [alt currencies] if a move is sustained, as opposed to the (BTC-USD) launch where alts truly struggled to maintain a bid.”
Remember the launch of Spot BTC ETFs in the United States in January? Since then, there has been a 40%+ increase in the price of bitcoin (BTC-USD), partially due to significant and ongoing inflows into these instruments up until recently.
The CEO of Alluvial and an expert on ETH, Mara Schmiedt, outlined the main similarities and contrasts between the spot BTC and ETH debuts. While the ~$60 billion [assets under management] forecast for BTC spot ETF inflows was exceeded this year in the U.S., we may expect ETH ETF inflows to reach about 30% of BTC’s overall market size, or ~$20 billion+ at present prices.
In the first few months after debut, she said, inflows into ETH ETFs could exceed $20 billion because they are predicted to increase pricing sensitivity in comparison to BTC.
In line with Schmiedt’s analysis, Bernstein noted in a June note that the “lack of an ETH staking feature in the ETF” will likely contribute to ether-holding funds’ expected slower demand than their BTC rivals once they are cleared for trade.
While outflows from the Grayscale Ethereum Trust are expected to initially exert downward pressure on ether’s price, SA Analyst Durant cautioned that inflows are anticipated to sustain it. With Bitcoin, there was an analogous dynamic in which Grayscale saw withdrawals totaling 6.5 billion USD in the first month. Ethereum ETFs’ limited appeal may also stem from the fact that they will not provide investors with staking incentives.
