Blockchain
Why Ethereum ETFs May Not Be as Successful as Bitcoin ETFs
The recent green light for Spot ETF on Ethereum has shaken up the cryptocurrency world, but not everyone is convinced it’s a game changer. Eric Balchunas of Bloomberg Intelligence predicts that Ethereum ETFs could capture only a fraction, around 10-15%, of the assets accumulated by Bitcoin ETFs.
Will Ethereum disappoint investors or is there more to the story? Dive in to find out!
Institutional Interest: Ethereum vs. Bitcoin
Comparing the institutional attractiveness of Ethereum and that of Bitcoin reveals a clear difference. Researcher Noelle Acheson points out that the largest Ethereum futures ETF (EETH) manages only 4% of the assets of its Bitcoin counterpart (BITO). This tells us that Ethereum does not receive the same love from institutional investors.
When spot Bitcoin ETFs were approved in January, a large influx of institutional investment was observed, driving the price of Bitcoin to new highs. According to analyst Hildobby, institutions purchased more than $12 billion worth of securities Bitcoin after ETF approval. Ethereum investors may not get the same boost in interest.
Acheson points out that Ethereum’s regulatory status remains unclear. Although Ethereum has been mentioned in court as a commodity, the SEC has not clearly defined it, making investing in the asset even more complicated.
Managing expectations: what to anticipate
Balchunas and his colleague James Seyffart had previously raised the chance of a spot Ethereum ETF approval to 75% due to pro-crypto developments in the United States. Balchunas, however, expects the launch of Ethereum ETFs to be disappointing compared to Bitcoin.
“When/if ETH spot ETFs eventually launch, we should prepare for a disappointing reception,” Acheson wrote in his newsletter, “Cryptocurrencies are Macro.” Acheson attributed this to traditionally lower institutional interest in Ethereum-based products in the United States and abroad.
Examine global trends
In Hong Kong, Ethereum makes up less than 15% of assets under management for spot ETFs; a similar trend whereby institutional interest has been largely muted. The US market, where investors already have access to Ethereum futures ETFs, is also showing a lack of enthusiasm.
“THE [assets under management] of the major ETH futures ETFs (EETH) is approximately 4% of that of the major BTC futures ETFs (BITO).”
Acheson
Looking forward
Some voices in the industry remain optimistic about the future of Ethereum. Investor Jim Bianco suggests that removing regulatory uncertainty around Ethereum’s proof of stake could bring significant institutional investment.
While the approval of the Ethereum ETF represents a milestone, its impact on institutional investments is still unclear. Balchunas and others warn against expecting a Bitcoin-style surge. As the market grapples with these changes, Ethereum and other altcoins hang in the balance.
Also check: Ethereum ETF Approved Implications for Bitcoin and Altcoins