Ethereum ETF Launch May Not Be As Bullish As You Think

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Ethereum ETF Launch May Not Be As Bullish As You Think

YEREVAN (CoinChapter.com) — The highly anticipated launch of spot ether exchange-traded funds (ETFs) may not meet the bullish expectations many have. Two major research firms, Wintermute and Kaiko, predict lower-than-expected demand and inflows for these new financial products.

Wintermute Predicts Modest Inflows and Potential Price Rise for Ethereum ETFs

Wintermute, a leading market maker, forecasts that ether ETFs will attract up to $4 billion in inflows over the next year. This is lower than the $4.5 billion to $6.5 billion most analysts have projected and significantly less than the $17 billion bitcoin ETFs have gathered since their U.S. launch six months ago.

Despite the lower inflow expectations, Wintermute anticipates ether’s price could rise by up to 24% within the next year due to these inflows. This reflects the firm’s outlook on the market’s reaction to the new ETFs.

Wintermute also highlights a regulatory decision affecting the competitiveness of ether ETFs. U.S. regulators denied issuers’ requests to allow ether ETFs to stake the crypto they own. This limits the income that could have been shared with investors, making ETH ETFs less competitive compared to direct holdings.

Kaiko Predicts Volatile Start for ETH ETFs

Research firm Kaiko shares a similar outlook. They recall that the launch of futures-based ETH ETFs in the U.S. last year experienced underwhelming demand. Will Cai, head of indices at Kaiko, noted that all eyes are now on the spot ETFs’ launch, with hopes for quick asset accumulation.

Cai emphasized that ether’s price would likely be “sensitive” to initial inflow numbers in the first days of trading. Kaiko’s data shows a sharp increase in ether implied volatility over the weekend. Contracts nearing expiry (July 26) jumped to 67% from 59%. This spike suggests lower market conviction around the ETF launch, as traders are willing to pay higher premiums to hedge their positions.

Ethereum ETFs Approved; Market Responds with Price Surge

The ETFs received final regulatory approval on Monday night. This allows issuers like BlackRock, Fidelity, Grayscale, VanEck, Franklin Templeton, Bitwise, 21Shares, and Invesco to start offering the funds beginning Tuesday.

A significant regulatory decision was the denial of issuers’ requests to permit ether ETFs to stake the crypto they own. This impacts the ETFs’ competitiveness. Wintermute mentioned that this loss of potential income from staking reduces the attractiveness of ETH ETFs compared to direct holdings.

Issuers also disclosed their expected management fees in recent filings. Grayscale’s Ethereum Trust plans to charge investors 2.5%. Most other managers set their fees in the range of 0.15% to 0.25%.

At the time of writing, Ethereum (ETH) is priced at $3,534.06, reflecting a 1.42% increase over the past day. The market cap stands at $424,893,946,728, positioning it as the second-largest cryptocurrency. The 24-hour trading volume has surged by 36.35%, reaching $21,481,248,201, which is 5.02% of the total market cap. The circulating supply is 120,228,315 ETH, with the same figure for the total supply.