Ethereum
BlackRock’s Ethereum Spot ETF Begins Trading Ahead of Market Open Amid Subdued Demand Expectations
Key points to remember
- BlackRock’s Ethereum ETF began pre-market trading on July 23, 2024, following SEC approval.
- Analysts estimate that capital flows into ETFs could reach $5.4 billion within six months.
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BlackRock’s Spot Ethereum ETF has started pre-market trading early Tuesday, after the SEC Approves Multiple Ethereum Spot ETFs.
This development allows traditional investors to invest directly in Ethereum without managing the digital asset themselves, although staking features and other staking-based derivatives were removed prior to approval.
In a promotional video for its Ethereum ETF, Jay Jacobs, BlackRock’s head of U.S. thematic and active ETFs, said:
“While many see Bitcoin’s primary appeal in its scarcity, many find Ethereum’s appeal in its utility. […] “You could think of Ethereum as a global platform for applications that operate without centralized intermediaries.”
Here is BlackRock’s Ether pitch to normies via @JayJacobsCFA“While many see bitcoin’s primary appeal in its scarcity, many see ethereum’s appeal in its utility. One could think of ethereum as a global platform for applications that operate without decentralized intermediaries.” $ETHA pic.twitter.com/ffyglfSTiB
— Eric Balchunas (@EricBalchunas) July 22, 2024
The SEC’s approval of major asset management firms including Fidelity, Grayscale, and Franklin Templeton represents a major milestone for Ethereum and the broader cryptocurrency market. Trading in these ETFs is set to begin today at 9:30 a.m. EDT. At the time of writing, Ethereum’s price is sitting at around $3,525, up 1% in the past 24 hours, according to data from CoinGecko.
While some analysts predict that these ETFs could see inflows of up to $5.4 billion in the first six months, algorithmic trading firm Wintermute offers a more cautious outlook. The firm is forecasting lower demand than expected, with inflows closer to $3.2 billion to $4 billion. Wintermute expects Ethereum ETFs to see 15% to 20% of the flow seen for Bitcoin ETFs, which could lead to an 18% to 24% price increase for ETH.
Two Factors Explain “Low Demand” for Ethereum ETFs
Wintermute attributes his less optimistic forecast to two key factors.
First, the lack of a staking mechanism within ETFs could diminish Ethereum’s appeal as an investment vehicle. Staking, a core element of Ethereum’s security model since its move to proof-of-stake in 2022, allows users to earn rewards by delegating tokens to the network.
The inability to stake Ethereum in these ETFs could make them less attractive to yield-seeking investors. Crypto Briefing’s previous articles on this issue explain nuances In detail.
Wintermute also cites the lack of a common narrative to attract investors as a potential obstacle for Ether ETFs. Unlike Bitcoin, which has successfully tapped into the “digital gold” narrative, Ethereum’s more complex ecosystem and diverse applications can make it difficult to present a unified investment thesis to potential ETF buyers.
Despite these challenges, Ethereum’s dual functionality as a digital currency and a platform for decentralized applications and smart contracts may appeal to investors interested in technological innovations and the diverse applications of blockchain, Wintermute says. The launch of Ethereum ETFs represents an important step in making cryptocurrency investments more accessible to traditional investors, which could impact both the cryptocurrency market and the broader financial landscape.
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