Cryptocurrency enthusiasts anticipating a game-changing launch of the Ethereum spot ETF might need to adjust their expectations, according to a recent analysis by Bloomberg ETF analyst Eric Balchunas. While the arrival of numerous Bitcoin spot ETFs in the US has seen phenomenal success, Balchunas suggests that a similar launch for Ethereum could be a “damp squib” compared to its predecessor.
Will Ethereum ETFs Replicate Bitcoin’s Success?
In a recent post, Balchunas stated, “No offense to Ethereum fans, but this is like the opening act following the headliner.” He further compared the situation to “Sister Hazel trying to follow Nirvana,” suggesting a significant difference in potential impact.
Balchunas’ prediction stems from both anecdotal evidence and market data, indicating that Ethereum ETFs might not reach the heights achieved by their Bitcoin counterparts, which have garnered over $7 billion in net inflows since their January 11th launch.
Prior to their launch, asset managers engaged in a protracted legal battle with the Securities and Exchange Commission (SEC) to secure approval for Bitcoin spot ETFs on public exchanges. This stemmed from concerns over potential manipulation within the Bitcoin market.
Grayscale’s successful court battle against the SEC last year paved the way for their Ethereum spot ETF application, followed by similar moves from BlackRock and Fidelity – the current leading providers of Bitcoin spot ETFs.
Also Read: Breaking the $60,000 Barrier: What’s Propelling Bitcoin’s Latest Pump?
Market Appetite
While many anticipate SEC approval for the Ethereum spot ETF, whether the market will embrace it remains unclear. Ethereum futures ETFs, launched in October 2023, saw minimal inflows and trading volume compared to Bitcoin’s first futures ETF launched in October 2021.
Furthermore, Canada’s Purpose Ether ETF currently holds $458 million CAD in assets under management (AUM), compared to the $2.5 billion CAD held by the company’s Bitcoin ETF. This, coupled with Ethereum’s global market cap being roughly one-third that of Bitcoin, suggests a potentially lower demand for an Ethereum ETF compared to its Bitcoin counterpart.
A Bitwise survey conducted last year revealed that 71% of registered investment advisors favored Bitcoin over Ethereum. In a statement, the asset manager attributed this preference to institutional investors’ limited understanding of the key differences between the two assets.
Also Read: Ethereum’s “Coming of Age”: Dencun Upgrade Poised to Shake Up the Crypto Landscape
Conclusion: A Different Path for Ethereum?
While the arrival of a Bitcoin spot ETF marked a significant milestone for the cryptocurrency market, the road ahead for Ethereum might be less dramatic. Whether the product garners significant investor interest remains to be seen, and the market may need to adjust its expectations for a potentially less revolutionary.
About The Author
