Ether ETFs Launch: Is It Worth the Hype?
By Gertrude Chavez-Dreyfuss
Investors are more cautious and divided ahead of the U.S. launch of exchange-traded funds tied to ether’s spot price on Tuesday, presenting a contrast to the general euphoria that preceded the arrival of ETFs linked to bitcoin.
Trading in the ETFs issued by nine asset managers led by BlackRock, VanEck, and Franklin Templeton on U.S. trading platforms comes six months after bitcoin ETFs debuted in January.
The consensus forecast is for ether ETFs to attract about 25% of bitcoin’s flows, though some estimate it to be just 10%.
One major issue for investors is the SEC’s exclusion of the “staking” mechanism, a key feature on the blockchain which releases ether, the world’s second-largest cryptocurrency after bitcoin.
Staking allows Ethereum users to earn rewards by locking up their ether to help secure the network. The rewards or yield come in the form of freshly-minted ether tokens and parts of network transaction fees.
As currently constructed, the SEC will only allow the ETFs to hold regular, unstaked ether.
Overall, investors agree that ether flows are unlikely to come close to those bitcoin ETFs captured in the first week of trading, given ether’s smaller market capitalization compared to bitcoin.
Analysis:
The launch of ether ETFs has created a buzz in the financial markets, with investors divided on its potential impact. While some believe it will attract a significant portion of bitcoin’s flows, others are concerned about the exclusion of the staking mechanism. This could limit the returns for investors who are looking to earn rewards through staking. However, the launch of ether ETFs is seen as a milestone in the crypto space, providing investors with access to a blockchain underpinning multiple applications. In the long run, as Ethereum and its adoption grow, the value of these ETFs is expected to increase. It remains to be seen how this will play out in the coming months, but for now, investors are keeping a close eye on the developments in the ether market.