Ethereum ETFs Expected to Drive Lower Demand Compared to Bitcoin Products: Analysts

• The debut of the newly approved Ethereum ETFs in the US is expected to generate considerably less demand compared to spot-Bitcoin products, as analysts suggest.
• Leading financial giants, such as BlackRock and Fidelity, are anticipating final approvals from the SEC to list these Ethereum funds.
• However, experts at JPMorgan predict that the net inflows for Ethereum ETFs will be significantly smaller than the $15.3 billion that Bitcoin vehicles have attracted this year.

Analysts anticipate lower demand for Ethereum ETFs compared to Bitcoin ETFs, citing differences in market perception and investment features.

Analysts Divided on Ethereum ETFs’ Potential

According to recent reports, the swift success of Bitcoin ETFs is largely due to Bitcoin’s perception as digital gold, a narrative that Ethereum lacks. Unlike Bitcoin ETFs, Ethereum funds will not provide holders with staking rewards, which could be a deterring factor for potential investors.

Caroline Bowler, CEO of BTC Markets Pty, emphasizes that Ethereum does not possess the same market stature as Bitcoin. Bitcoin’s market value of $1.4 trillion overshadows Ether’s, which is approximately one-third of Bitcoin’s market cap. This significant difference could result in a more subdued impact of the Ethereum ETFs in the US market.

Interestingly, the SEC has recently indicated its intent to approve spot Ethereum ETFs, following its acceptance of Bitcoin funds after a pivotal court ruling in 2023. While this move has driven up Ether’s price, its 109% gain over the past year lags behind Bitcoin’s impressive 169% surge, which included reaching its all-time high in March.

JPMorgan analysts, led by Nikolaos Panigirtzoglou, project that Ether portfolios will attract a “modest” $1 billion to $3 billion in net inflows for the rest of the year. Contrary to that, Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, argues that these products may struggle to garner even 20% of the $62.5 billion currently managed by Bitcoin ETFs in the US market.

Despite these cautious projections, Vetle Lunde, a senior researcher at K33 Research, remains optimistic, forecasting about $4 billion in net inflows within the first five months of the Ethereum ETFs’ launch, which he believes could lead to a significant “supply absorption shock” boosting ETH’s price.

VanEck Bullish on Ethereum

VanEck, an asset management firm seeking to launch an Ethereum ETF, is optimistic about Ethereum’s potential, citing the robust applications of the Ethereum blockchain within the crypto financial services sector.

Matthew Sigel, Head of Digital-Asset Research at VanEck, believes investors will come to appreciate Ethereum’s greater room for application and innovation, surpassing what Bitcoin offers.

It is worth noting that when nine new US Bitcoin ETFs were introduced on January 11, there was an initial decline in Bitcoin’s price, partially due to outflows from the Grayscale Bitcoin Trust. Nevertheless, the strong demand for these new ETFs soon prevailed, leading Bitcoin to resume its upward trend.

Similarly, Grayscale plans to convert its $11 billion Ethereum Trust into an ETF, mirroring its Bitcoin fund strategy. While redemptions from the Grayscale Ethereum Trust might induce selling pressure on ETH, the broader market impact remains to be seen.

As of the current market status, ETH is trading around $3,830, while Bitcoin persists near its peak levels of $73,700 observed in March. Ether remains below its all-time high of $4,866 set during the 2021 bull run.

Conclusion

In conclusion, while Ethereum ETFs’ potential for demand appears promising, they are projected to attract significantly less interest compared to Bitcoin ETFs. Factors such as the absence of staking rewards and differences in market perception contribute to this outlook. However, the approval of spot Ethereum ETFs by the SEC marks a pivotal moment for Ether, offering both challenges and opportunities for future growth. Investors and market participants will need to closely monitor developments in this space.