ETFs
Ethereum ETFs Are Coming. Can They Revive Tepid Crypto Markets?
Not one to show his hand, SEC Chairman Gary Gensler still gave as optimistic a prognosis on Ethereum ETFs as could be expected yesterday, Speaking At the Bloomberg Invest conference, Gensler said the process of engaging with issuers was “smooth” amid his usual frosty statements about the cryptocurrency industry, including accusing his interlocutor of chasing “clicks.”
Gensler’s rare nod appears to confirm Bloomberg’s predictions soothsayers that ETFs could launch as early as July 2. With crypto assets ranging from Coinbase to Bitcoin crater in recent days, could the arrival of an Ethereum ETF reinvigorate the bull market? After all, the approval and launch The rise in Bitcoin ETFs in January served as a catalyst for the current rally.
The short answer is: probably not. Ethereum has always been Bitcoin’s lesser-loved little brother, even with its new smart contract capability, improved transactions, staking, and many other benefits. It’s been years since anyone predicted flipping, that legendary day when Ethereum will overtake Bitcoin, with a straight face.
I met with Christopher Perkins, president of venture capital firm CoinFund, who told me that one of Ethereum’s main challenges would be branding. Bitcoin is easy. The proto-cryptocurrency boasts the nickname “digital gold,” which any investor can understand. A baby boomer looking to allocate the millions of dollars earned from selling a house he bought in 1970 for $10,000, however, might have a harder time understanding Ethereum’s value proposition. What exactly is a smart contract and why should we care? “These baby boomers, with money, they don’t ape things,” Perkins told me.
Despite the hype surrounding Bitcoin ETFs, we’re seeing slow adoption as investors become more comfortable with the new asset class. As Perkins said, ETFs offer two primary benefits: regulatory certainty coupled with operational scalability, or an improved user experience. Bitcoin, thanks to its early commodity designation, was never really in a regulatory gray area, though ETFs allowed people to buy them directly in their brokerage accounts, rather than setting up a Coinbase or Robinhood account. With Ethereum, however, the approval and launch of ETFs truly creates a security moat that didn’t exist before, especially after months of speculation that the SEC would reject applications.
Additionally, an Ethereum ETF that offers yield could be a game changer, if the SEC ever approves it. Last year, Perkins led a project to provide a benchmark rate for staking yields on Ethereum, which he noted is often higher than Treasury yields when adjusted for inflation. “The ETF is going to be very important, but it’s also flawed because it’s going to deprive investors of that yield up front,” he said.
The story continues
If Ethereum ETFs do finally launch next week, or soon after, don’t expect a surge in adoption. But Perkins said the long-term view is needed: “This is just another step in mainstreaming and reducing regulatory risk.”
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
This story was originally featured on Fortune.com