Galaxy Digital is an exchange-traded fund that tracks Ethereum’s native tokens. ETH
+2.76%
After approval, this could soon become a multi-billion dollar market opportunity.
The U.S. Securities and Exchange Commission (SEC) recently shifted gears to accelerate approval of these funds, with some analysts predicting that the first ETH ETF approval could come next week. The SEC has not yet approved the important S-1 filing required for the funds to hit the market.
In a report Wednesday, Galaxy Research Vice President Charles Yu said that in its first five months of trading, the ETH ETF could conservatively see 20% or more than 50% of the Bitcoin ETF’s inflows. This was a surprise hit after the Bitcoin ETF. Fund launched in January.
The Bitcoin ETF saw net inflows of $15.1 billion from launch through June 15, Yu wrote. If his predictions are correct, similar Ether-based funds could see inflows of between $3 billion and $7.5 billion. This is somewhat consistent with Bitwise Chief Investment Officer Matt Hougan’s prediction that the US spot ETH ETF could attract $15 billion worth of net inflows in its first 18 months.
“The Bitcoin ETF has been operating for about six months and could be a useful basis for investigating the possible adoption of an Ethereum spot ETF.” Yu wrote in his report: In particular, he said Bitcoin ETFs are at least “partly responsible” for the rise in Bitcoin prices this year.
“We believe the potential launch of a spot Ether ETF will have a significant positive impact on the market adoption of Ethereum and the broader cryptocurrency market,” Yu added. Yu added that the ETF will help legitimize ETH in the eyes of institutional investors, policymakers, and regulators. Demand is likely to be driven by independent investment advisors and broker-dealer platforms, he said.
Roses aren’t everything
Nine issuers, including stalwarts like BlackRock, Fidelity, and VanEck, are competing to launch 10 spot market ETH ETFs in the United States. All three companies have also launched spot Bitcoin ETFs, with BlackRock’s IBIT trust accounting for the majority of Bitcoin inflows into the fund.
Grayscale, a unit of Digital Current Group, is also looking to convert its closed-end Ethereum trust into an ETF, similar to its acquisition of the giant Grayscale Bitcoin Trust in January. . GBTC hit at least $17.5 billion. from spill Many market commentators, including Yu, say that relatively high fee funds have caused the price of Bitcoin to decline.
Likewise, Yu believes that monthly outflows of 319,000 ETH ($1.1 billion) from the Grayscale Ethereum Trust could act as an “overhang” on net ETF inflows.
The SEC also proposed regulations for the proposed fund that could limit investor interest, such as preventing companies from holding the underlying Ethereum to earn yield, Yu said.
That said, the ETF’s final launch could have a larger market impact on the price of ETH due to several structural differences between Bitcoin and Ethereum. This includes reducing the amount of ETH locked in staking programs, reducing supply on exchanges, and reducing net emissions.
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