Tepid Response to Ethereum ETFs, Limited Inflows Expected by JPMorgan
According to Bloomberg, analysts predict that the recently approved Ethereum ETFs in the U.S. might not generate the same demand as Bitcoin spot products. Major financial institutions such as BlackRock and Fidelity are still awaiting final approval from the U.S. Securities and Exchange Commission (SEC) to launch the highly anticipated Ethereum funds.
However, JPMorgan strategist Nikolaos Panigirtzoglou forecasts that net inflows into Ethereum ETFs will be significantly lower than the $15.3 billion that has flowed into Bitcoin funds this year.
Mixed Expectations for Ethereum ETFs
Analysts have divergent views on the potential of Ethereum ETFs. The report highlights that the success of Bitcoin ETFs is partly due to the contentious narrative of Bitcoin as “digital gold,” a concept that Ethereum lacks. Additionally, Ethereum funds do not offer the staking rewards that come with directly holding tokens to maintain the blockchain.
Caroline Bowler, CEO of BTC Markets Pty, emphasized that Ethereum does not share the same market position as Bitcoin. Bitcoin’s market cap stands at $1.4 trillion, which is three times that of Ethereum. This disparity suggests that U.S. Ethereum ETFs might not have a similar impact.
Recent Developments and Market Reactions
The SEC’s recent openness to approving spot Ethereum ETFs marks a surprising shift, following its earlier acceptance of Bitcoin funds after a court reversal in 2023. Although this development has driven up Ethereum’s price, its 109% increase over the past year still lags behind Bitcoin’s 169% surge, which includes a record high in March.
JPMorgan strategists, led by Nikolaos Panigirtzoglou, estimate that potential Ethereum portfolios could attract a “modest” net inflow of $1 billion to $3 billion over the next year.
In contrast, Bloomberg Intelligence’s senior ETF analyst Eric Balchunas reports that these products may struggle to achieve even 20% of the current $62.5 billion in Bitcoin ETF assets in the U.S.
Optimistic Views and Market Implications
Despite these reservations, Vetle Lunde, a senior research analyst at K33 Research, remains optimistic, predicting that Ethereum ETFs could attract $4 billion in net inflows in the first five months. He anticipates a significant “supply absorption shock” that could drive up ETH prices.
VanEck, a fund management company, is bullish on Ethereum, aiming to launch an Ethereum ETF. The company is optimistic about the adoption of the Ethereum blockchain, particularly its use in crypto financial services.
Matthew Sigel, VanEck’s Head of Digital Asset Research, believes that investors will eventually recognize the greater potential for applications and innovation within the Ethereum ecosystem compared to Bitcoin.
Historical Context and Future Outlook
Notably, the launch of nine new U.S. Bitcoin ETFs on January 11 initially led to a decline in Bitcoin prices, accompanied by outflows from the Grayscale Bitcoin Trust. However, the strong demand for new ETFs eventually outweighed these concerns, and Bitcoin resumed its upward trajectory.
Similarly, Grayscale plans to convert its $11 billion Ethereum product into an ETF, akin to its Bitcoin fund. While redemptions from the Grayscale fund could exert selling pressure on ETH, the overall market impact remains uncertain.
As of the latest reports, ETH is trading at $3,830, while Bitcoin is nearing its all-time high of $73,700 set in March. Ethereum still has some ground to cover to reach its all-time peak of $4,866 achieved during the 2021 bull market.
Conclusion
The response to Ethereum ETFs is expected to be more subdued compared to Bitcoin ETFs, with limited inflows projected by JPMorgan. However, the potential for Ethereum’s blockchain adoption and its innovative capabilities keeps some analysts optimistic about its long-term prospects. As the regulatory landscape evolves, the performance and acceptance of Ethereum ETFs will be crucial in shaping the future of digital asset investments.
