ETFs
Bitcoin’s little brother: will Ethereum ETFs also increase the price of Ether?
Posted June 14, 2024 at 11:10 AM EST.
When the U.S. Securities and Exchange Commission (SEC) approved Forms 19b-4 for eight different spot exchange-traded funds (ETFs), the price of ether jumped nearly 20% within hours of the new.
Now, ETF applicants submit their S-1s, a registration form that must be approved by the securities regulator before the funds can begin trading on an exchange. SEC Gensler to have a reference to to have this process completed by the end of summer during his speech before the Senate Appropriations Committee on Thursday.
Registrations are being reviewed at the “staff level,” Gensler said, and they always will be. depend on issuers and their responsiveness to the comments they receive. With the ball in the court of ETF issuers, where does the market see the price of ether moving before and after launch?
Investment management firm VanEck, whose spot ether ETF application was one of eight to receive approval on its Form 19b-4, recently raised its 2030 price target for ether at $22,000. But Katie Talati, head of research at crypto asset management firm Arca, said in an email to Unchained that lately, “ether has struggled to establish a strong narrative over others layer 1 solutions and the emergence of layer 2 solutions.
Potential ETH Price in the Short Term (Pre-Launch)
In the short term, this lack of storytelling could give ether a boost – although probably not to $22,000 – as traders were underpositioned in the asset when the approval announcement was made. done.
Coinbase Institutional’s trading desk “has seen an increase in Ether purchases following the 19b-4 approvals,” David Duong, Coinbase’s head of institutional research, said in an email: “This has not been as aggressive as we’ve seen in bitcoin before. spot Bitcoin ETFs launched in the United States. This leads us to believe that the market is still underpositioned.
For Bitcoin, it was a “buy the rumor, sell the news” event because there was so much speculation before Bitcoin ETFs were approved in January. While in the case of ether, “traders didn’t sell the news, they bought it,” due to the surprise nature of the approvals, said Glen Goodman, author of “The Crypto Trader,” in an email to Unchained.
Investors should still exercise caution, Katie Stockton’s Fairlead Strategies report from June 10 indicates that ether has already given back some of its outperformance to bitcoin since the news of the spot ether ETF. The analysts predict that bitcoin will continue to outperform ether in the near term, describing their analysis of the weekly MACD and ether stochastics as neutral, adding that they “will assume a bullish bias once ether crosses the resistance near $3,925 on consecutive weekly close basis.”
Where ETH Could Go Long Term (Post Launch)
After experiencing a pullback following the ETF’s approval, “bitcoin rose 72% from $39,201 to $67,339, ultimately reaching a new all-time high price in March 2024,” said Teddy Fusaro, president from Bitwise, a crypto investment firm that launched a spot bitcoin ETF in the United States.
If this were to happen, ether would be expected to rise more than 35% from its current price to reach its all-time high of $4,867 in November 2021, Fusaro said.
While this may be plausible, Arca’s Katie Talati is not convinced that ether spot ETFs will have such a large long-term impact on the price of ether, given that institutional demand does not is not as high for ether as for bitcoin.
In a previous interview with Unchained, Ophelia Snyder, co-founder and president of crypto ETP provider 21Shares, alluded to this, saying that institutional knowledge of ether pales in comparison to that of bitcoin. 21Shares operates the 21Shares Ethereum Staking (AETH) ETP in Europe as well as a spot bitcoin ETF in the United States known as ARKB,
Talati also noted that “the Grayscale Ethereum Trust, which has $10 billion in assets under management (AUM), will also likely experience consistent capital outflows and cause daily selling pressure in the Ethereum market.”
A recent report from crypto research firm Kaiko shared a similar sentiment. “Once Ether ETFs launch, it is reasonable to expect selling pressure on Ether due to likely outflows or redemptions due to Grayscale’s ETHE, which has been trading at a discount of between 6% and 26% in the last three months.
However, Vetle Lunde, senior analyst at crypto research firm K33, in a recent report predicts that US ether spot ETFs will attract $4 billion in net inflows in the first five months after launch. In a message to Unchained, Vetle explained that he expects about 20% of that $4 billion to come from institutional investors, bringing their projected assets under management to $700-800 million .
While some wonder whether lack of ownership in Ether ETFs will limit investor interest in the funds due to the lack of APY (annual percentage yield), Lunde does not see this as a problem, writing that “ 99.1% of assets under management in Canadian dollars.” Ether ETFs are held in unstaked products, while 97.9% of European assets under management are held in unstaked ETPs. This indicates that staking is far from a major issue among ETP investors.
In April, Hong Kong’s Securities and Futures Commission approved the trading of ether spot ETFs as well as their Bitcoin counterparts. Using the Hong Kong market as a reference point, Crypto Is Macro Now author and economist Noelle Acheson wrote in a recent article newsletter that “when/if ether spot ETFs eventually launch, we should prepare for a disappointing reception.” Acheson bases this prediction on the fact that since these securities began trading in Hong Kong, ether has represented less than 15% of the total assets under management of spot crypto ETFs.
Pranav Kanade, portfolio manager of VanEck’s digital asset alpha fund, agrees that interest in spot ether ETFs may not be as explosive as it was for bitcoin, writing at Unchained that “the narratives in favor of bitcoin aligned perfectly, particularly in the United States. …the stars don’t seem to align as perfectly as with the Bitcoin ETF.
Despite this, Kanade said his bullish ether price forecast for 2030 assumes that ETFs will be a catalyst for increased interest in the Ethereum network and its various applications, such as stablecoins and other tokenized financial assets. “This will in turn lead to increased activity levels on Ethereum or its layer 2 solutions, resulting in more ether being burned and a decrease in the overall ether supply,” Kanade said.