Key Takeaways:
- Ether spot ETFs could see $1 billion in monthly net inflows once approved for trading in the U.S.
- Ether is more price sensitive to ETF inflows than Bitcoin due to locked-up supply and lower exchange holdings
- Outflows from the Grayscale Ethereum Trust (ETHE) may limit some ETF demand, but to a lesser extent than Bitcoin
Related: Ethereum ETF Fee War Heats Up as VanEck Offers Zero Fees
Ether Spot ETFs Could See $1 billion net inflows every month
As the U.S. Securities and Exchange Commission (SEC) inches closer to approving spot Ether exchange-traded funds (ETFs), a new report from Galaxy Research suggests the new products could attract over $5 billion in net inflows within the first five months.
“We expect the net inflows into ETH ETFs to be 20-50% of the net inflows into BTC ETFs over the first five months, with 30% as our target, implying $1 billion/month of net inflows,” said Galaxy analyst Charles Yu.
The anticipated demand for Ether ETFs is driven by several factors, including the large amount of ETH supply that is currently locked up in staking, bridges, and smart contracts. This supply scarcity makes Ether more price sensitive to ETF inflows compared to Bitcoin.
“Ether will be more price sensitive to ETF inflows than bitcoin due to the amount of total supply of ETH that is locked in staking, bridges, and smart contracts, and the lower amount held on centralized exchanges,” the report noted.
However, the report also cautioned that outflows from the existing Grayscale Ethereum Trust (ETHE) could limit some of the demand for new Ether ETFs. Galaxy estimates these negative flows could amount to around 319,000 ETH per month, or $1.1 billion.
“Unlike GBTC, ETHE is not faced with forced selling due to bankruptcy from the likes of 3AC and Genesis, which supports the notion that ether will see less selling pressure related to Grayscale trusts than bitcoin,” the report added.
The SEC is expected to approve spot Ether ETFs as soon as July 4, according to a recent Reuters report, paving the way for these new investment vehicles to hit the market.
Ethereum & ETF Related Information
- The launch of Bitcoin spot ETFs in the U.S. in January 2023 was a major milestone for the crypto industry, attracting over $5 billion in net inflows.
- Ether has outperformed Bitcoin over the past year, gaining over 80% compared to Bitcoin’s 50% rise, making it an increasingly attractive investment option.
- Experts believe the availability of Ether ETFs could further drive institutional adoption and provide more exposure to the second-largest cryptocurrency.
Ethereum ETF News
- Ethereum ETF Fee War Heats Up as VanEck Offers Zero Fees
- Ethereum ETF Approval on the Horizon: What Investors Need to Know
- Ethereum ETF Approval: Insider Secrets Revealed in Explosive Options Data
| Ethereum ETF FAQs | |
|---|---|
| What is an Ethereum ETF? | An Ethereum ETF (Exchange-Traded Fund) is a financial instrument designed to track the price of Ethereum, allowing investors to buy and sell shares on conventional stock exchanges. This regulated investment product offers a straightforward way for individuals to participate in the cryptocurrency market without the need to directly manage digital assets. |
| How do Ethereum ETFs work? | Ethereum ETFs function within the regulatory framework of conventional financial markets, allowing access to a regulated and secure means for traditional investors to diversify their portfolios with crypto investments. These ETFs constitute shares traded on regulated stock markets, making them available to institutional and retail investors. |
| What is the difference between spot ETH and Ethereum ETF? | The key difference between spot and ETF lies in ownership. Spot allows investors to directly hold and manage their Ethereum by using a medium such as a centralized exchange. With Ether ETF, investors hold shares that track the real-time price of Ether. These shares represent ownership of the underlying asset held by the fund. |
| What are the benefits of investing in Ethereum ETFs? | Some of the merits of Ether ETF include accessibility to both retail and institutional investors, operating within a regulatory framework, simplicity and low operational risks, and diversification of investment portfolios. |
| What are the drawbacks of Ethereum ETFs? | Some of the drawbacks of Ether ETF include tracking error, price volatility, and potential centralization of ETH ownership as institutional investors may purchase large quantities of assets. |
| Will Ethereum get an ETF? | Yes, the Ethereum futures ETF was listed in October 2023 in the U.S. financial exchanges. In May 2024, the US Securities and Exchange Commission (SEC) gave a green light to spot Ether exchange-traded funds (ETFs) in the United States. |
| How to invest in Ethereum ETFs? | Ethereum ETFs are listed on traditional stock exchanges and do not require buyers to have a wallet or interactions with crypto exchanges. Investors can easily purchase or sell shares of the fund through conventional stock exchanges. |
