Here’s How Much Institutions Can Pour in Spot Ethereum ETFs Initially (Report)
Traders’ positions reveal a moderate degree of excitement surrounding spot Ethereum ETFs. Despite a relatively uneventful week, the anticipated arrival of these funds is expected to mirror the explosive path witnessed during the launch of Bitcoin ETFs, according to K33 research.
In fact, projections from the research firm suggest that spot Ethereum ETFs could potentially witness an estimated $4 billion flowing into these investment vehicles within the initial five-month period after their launch.
$4B Windfall Anticipated for Ethereum ETFs
The upcoming launch of Ethereum-based exchange-traded funds (ETFs) in the United States, which will allow direct investment in Ether, is expected to attract significant inflows. According to the firm’s latest report, these ETFs may see around $4 billion in inflows within the first five months.
K33 Research drew comparisons between the assets under management in existing Ethereum-based exchange-traded products worldwide and similar Bitcoin products, as well as analyzing the open interest (OI) in futures contracts on the Chicago Mercantile Exchange (CME), a popular marketplace for institutional investors.
The report highlighted that while the current open interest in ETH futures on the CME stands at 23% of the size of BTC futures, the average share of ETH futures has been around 35% of BTC futures since they began trading on the CME in 2021. This discrepancy suggests a significant institutional demand for ETH exposure in the US market, according to K33.
The approval of spot Bitcoin ETFs triggered over 60% rally in the price of the world’s largest digital asset, which subsequently drove it to new record highs. According to K33, introducing Ethereum ETFs could lead to ETH outperforming BTC after nearly two years of lagging behind.
Meanwhile, Bloomberg ETF analyst Eric Balchunas previously predicted that the spot Ethereum ETFs will attract between 10% and 20% of the inflows witnessed by the Bitcoin counterpart.
“10 may be a bit much. but I’d at least divide by 5 when it comes to expectations around the Ether spot ETFs re flows/volume/media/everything relative to spot bitcoin ETFs. That said, grabbing 20% of what they got would be a huge win/successful launch by normal ETF standards.”
Staking Abandoned By Ether ETF Issuers
The spot Ethereum ETF applicants have strategically removed portions from their filings that would have permitted staking of the fund’s assets, likely to appease the SEC’s concerns. This move comes as the SEC views staking as an illegal offering by cryptocurrency platforms, potentially constituting unregistered securities. The regulator had even taken action against various crypto platforms for offering staking services to US customers.
Notably, K33’s report also highlighted that excluding the staking feature from Ethereum ETFs would not adversely impact the inflows into these investment products.
The firm pointed out that in Canadian Ethereum ETFs, 99% of assets under management are held in funds that do not involve staking, while in European products, the corresponding figure stands at 98%.
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