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Will Spot Ethereum ETFs Live Up to the Hype? Analysts Weigh In

Analysts believe that Ethereum ETFs will likely have a smaller market impact than Bitcoin ETFs did.

By: Mehab Qureshi Loading...

Will Spot Ethereum ETFs Live Up to the Hype? Analysts Weigh In

With spot Ethereum exchange-traded funds (ETFs) expected to launch this month, pundits disagree on what the funds’ debut will mean for the markets.

Analysts are divided on whether the launch will have the same impact that spot Bitcoin ETFs did, with the price of BTC surging 58% in nine weeks of the funds launching to tag its current all-time high of $73,738.

While some onlookers tip that the launch of spot Ether ETFs will be a groundbreaking event, others anticipate the funds' will debut with more of a whimper than a bang.

How will Ether ETFs stack up against Bitcoin ETFs?

Ryan Lee, chief analyst of Bitget Research, told The Defiant that Ethereum ETFs will likely drive lower trading volumes compared to Bitcoin ETFs.

"Bitcoin and Ethereum are two assets with different fundamentals and distinct market appeal,” he said. “When Ethereum ETFs start trading, ETH will capture about 2.5% of its market cap. If this bull case plays out, spot Ethereum ETF might see $11.55 billion in assets under management."

Galaxy Research also foresees inflows coming at a slower pace for spot Ethereum ETFs when compared to their Bitcoin counterparts.

"We estimate that spot Ethereum ETPs will see approximately $5 billion in net inflows in the first five months of trading," Charles Yu, Vice President of Research at Galaxy wrote.

However, many onlookers have bullish expectations for the price of Ethereum once ETFs debut.

Steno Research predicts that ETH could potentially reach at least $6,500 later this year following the launch of Ether ETFs — beating out ETH’s previous all-time high by 33%.

Standard Chartered offers an even more bullish forecast, suggesting the approval of spot Ethereum ETFs could bring up to $45 billion in inflows within the first 12 months, potentially driving ETH’s price to $8,000 by the end of 2024.

Others, like Jupiter Zheng, partner at HashKey Capital's Liquid Fund, expect the ETF launch news to trigger a brief and modest rally, followed by a strong 'sell-the-news' event.

Ethereum ETFs exclude staking

One factor dampening excitement is the absence of staking rewards from the ETF filings, according to the analysts.

Since September 2022, Ethereum has leveraged Proof of Stake consensus to derive its security from staking. Node operators must lock up at least 32 ETH as collateral to participate in validating transactions and securing the network. In return, stakers receive a share of newly created ETH as rewards.

In May, BlackRock, Grayscale, and Bitwise updated their SEC applications to remove provisions concerning staking. The moves came following dialogue between the prospective issuers and the SEC.

“Non-staked Ethereum incurs an opportunity cost by foregoing the benefits of staking rewards, including inflation rewards, priority fees, and MEV income,” Lee said. “This opportunity cost makes spot Ethereum ETFs less attractive to crypto-savvy institutions… However, traditional investment institutions constrained by corporate regulations and legal frameworks can only gain exposure through ETFs and wouldn't face the opportunity cost of staking."

Fee Waivers to Attract Institutional Investors

To attract institutional investments, several ETF issuers have announced fee waivers for their spot Ethereum funds.

Franklin Templeton revealed a 0.19% sponsor fee but will waive it for the first $10 billion in assets for six months. Similarly, VanEck announced a 0.20% sponsor fee, which will be waived for the initial $1.5 billion until an unspecified date in 2025.

Notably, both BlackRock and Fidelity haven't disclosed their fees yet.

Meanwhile, the highly anticipated launch of spot Ethereum ETFs has faced delays. Analysts initially expected approval by July 2, but the U.S. Securities and Exchange Commission (SEC) has requested issuers submit revised filings by July 8.

As such, Nate Geraci, co-founder of ETF Institute, predicts the funds will launch during the week of July 15.

The price of ETH is up 1.2% over the past 24 hours, according to CoinGecko.

Related: Data Contradicts Narrative: Ethereum Continues to Dominate Layer 1 Sector

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