News
Why Ethereum ETF Demand Will Disappoint Crypto Investors – DL News
- Spot Ethereum ETFs are scheduled to launch on Tuesday.
- They may 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 may not rush to get exposure to the funds.
Spot Ethereum ETFs are likely to launch in the U.S. on Tuesday, potentially opening the door to a new wave of cryptocurrency ETF mania.
Not everyone, however, believes that Ethereum ETFs will become as popular as the Bitcoin ETFs that launched in January.
Creator of the cryptocurrency market Wintermute he wrote On Monday, he expects Ethereum ETFs to raise between $3.2 billion and $4 billion in assets within the first year.
Since the company expects Bitcoin ETFs to accumulate about $32 billion before the end of the year, this means that Ethereum ETFs will only receive about 10%-12.5% of the amount of assets that Bitcoin ETFs are expected to receive.
In that scenario, Ether’s price could potentially rise 18% to 24%, Wintermute said, taking the second-largest cryptocurrency to $4,200. That’s a new 2024 high, but still below Ether’s 2021 all-time high of $4,800.
“This conservative estimate is influenced by the lack of a staking mechanism, which could reduce the attractiveness of Ethereum as an ETF investment vehicle,” Wintermute said in the report.
Staking is a process by which Ether investors can lock in their investments in the network and secure a 3% return, paid in Ether.
In their current form, Ethereum ETFs will not allow investors to gain exposure to that return, which could discourage them from seeking investment vehicles.
Join the community to receive our latest stories and updates
Not only that, but ETF holders also have to pay management fees, which align 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 crypto data firm Kaiko Research. DL News.
Wintermute said it would revise its expectations if the U.S. presidential election led to a change in leadership at the Securities and Exchange Commission, which would open the door for Ethereum ETFs to implement a staking feature.
Meanwhile, Bloomberg Intelligence ETF analysts Eric Balchunas and James Seyffart, they said that Ethereum ETFs could capture between 15% and 25% of the assets flowing into Bitcoin ETFs.
This expectation — in part based on demand that Hong Kong Ethereum ETFs have experienced versus 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 market correspondent for DL News. Have an Ethereum ETF tip? Contact us at tcarreras@dlnews.com