Ether ETFs Analysis
Ether (ETH) spot exchange-traded funds (ETFs) are anticipated to make a significant impact once approved for trading, attracting approximately $1 billion of net inflows per month, as per Galaxy Research’s recent report.
The approval process for Ether ETFs in the U.S. is progressing, with the Securities and Exchange Commission (SEC) having given the green light to the filings from applicants. The final step involves the approval of their S-1 filings before these products can be traded. Notably, spot bitcoin ETFs were launched in the U.S. in January.
Galaxy Research highlights that the demand for Ether ETFs is expected to originate from independent investment advisors or broker/dealer platforms, similar to the trend observed with bitcoin ETFs.
Ether is projected to display higher price sensitivity to ETF inflows compared to bitcoin due to the significant portion of ETH supply locked in staking, bridges, and smart contracts, along with the relatively lower amount held on centralized exchanges.
In terms of potential limitations, Galaxy Research points out that the demand for spot ether ETFs might be restricted due to the absence of staking rewards. Additionally, outflows from the Grayscale Ethereum Trust (ETHE) could impact ether ETF inflows, with an estimated negative flow of about 319,000 ETH per month, equivalent to $1.1 billion.
Despite these challenges, the conversion of ETHE to an ETF is expected to have a relatively smaller impact on the price of Ether compared to the conversion of the Grayscale Bitcoin Trust (GBTC). This is partly due to the fact that ETHE is not subject to forced selling risks from entities like 3AC and Genesis, which could alleviate selling pressure related to Grayscale trusts for Ether.
There is growing speculation that the SEC may approve spot ether ETFs as early as July 4, according to a recent Reuters report.