ETFs
Galaxy Digital: Ethereum (ETH) ETFs Set to Launch in July 2024, SEC Approval Sparks Market Excitement
The cryptocurrency market is abuzz as the US Securities and Exchange Commission (SEC) approved 10 Ethereum (ETH) spot ETFs, paving the way for their launch in July 2024. According to Digital GalaxyThe SEC’s approval of all 19b-4 filings on May 23, 2024 marks a significant milestone in the cryptocurrency industry, potentially generating substantial investor interest.
Impact on the Bitcoin ETF market
The performance of Bitcoin ETFs, launched on January 11, 2024, has set a precedent for Ethereum ETFs. Bitcoin ETFs have already generated $15.1 billion in net inflows as of mid-June 2024. Analysts predict that Ethereum ETFs could reach 20% to 50% of Bitcoin ETF net inflows in the first five months, targeting $1 billion per month.
Investor Interest in Ethereum ETFs
The primary market for these ETFs is expected to be independent investment advisors and those affiliated with banks or broker-dealers. Ethereum’s unique features, such as substantial shares locked in staking, bridges, and smart contracts, make it more susceptible to ETF inflows compared to Bitcoin.
Recent Developments and Market Forecasts
Despite initial skepticism about SEC approval, Bloomberg analysts Eric Balchunas and James Seyffart increased the likelihood of approval to 75% after reports of SEC engagement with exchanges. All Ether spot ETP applications were approved by the SEC in late May, and trading could begin as early as the week of July 11, 2024.
Challenges and considerations
Several issuers have withdrawn their applications, including ARK, Valkyrie, Hashdexand WisdomTree. Grayscale is looking to convert the Grayscale Ethereum Trust (ETHE) into an ETP, similar to its Grayscale Bitcoin Investment Trust (GBTC). The SEC’s approval of rule changes for listing spot-ETH ETPs on exchanges is a critical step, but individual issuers still need to finalize their registration statements.
Bitcoin ETFs have provided valuable insights. Their cumulative net inflows exceeded $15 billion, or an average of $136 million per trading day. This success has implications for the potential demand and price impact of Ethereum ETFs. Ethereum’s tighter supply on exchanges and lower net issuance suggest it may be more price sensitive to ETF inflows.
Institutional and retail demand
Bitcoin ETFs have seen significant retail demand, with growing institutional interest. More than 900 U.S. investment firms, including major banks and hedge funds, hold Bitcoin ETFs. Wealth management platforms have yet to fully expand access to Bitcoin ETFs, but potential future access to institutional platforms could be a significant catalyst for Bitcoin and Ethereum adoption.
Structural differences between BTC and ETH
The market capitalization of Bitcoin is currently 2.9 times that of Ethereum. Bitcoin futures markets are about twice as large as Ethereum futures. Based on these metrics, Ethereum spot ETF inflows are estimated to be around a third of Bitcoin ETF inflows, potentially reaching $1 billion per month.
Structural differences, such as the lack of staking rewards for Ethereum ETFs, could impact demand. Converting ETHE from Grayscale to an ETF may also result in significant capital outflows, similar to what was seen with GBTC.
Future prospects
Overall, the launch of Ethereum spot ETFs is expected to have a positive impact on market adoption of Ethereum and the broader cryptocurrency market. Increased accessibility and greater acceptance through regulatory approval and trusted financial services brands are key factors driving this optimism.
The introduction of Ethereum ETFs could also influence the approval of ETFs for other altcoins in the future, expanding the scope of cryptocurrency investments available to retail and institutional investors.
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