Industry watchers believe that the expected launch of spot-ether ETFs would not be as successful as Bitcoin funds. This is because educating investors could be more difficult this time.
Also, ETFs that are proposed will not include one of ETH’s most attractive features.
In relation to the second point, last week issuers announced that their proposed funds will not stake their ETH. The Securities and Exchange Commission has approved the 19b-4 submissions from the exchanges that will list these funds. However, the ETFs may not be able to start for weeks or even months.
The process of staking ether involves depositing ETH on the Ethereum blockchain to ensure its security. Staking ether earns a return for those that do it.
Christopher Jensen who heads crypto research for Franklin Templeton told Blockworks that ETH is popular with institutional investors because its yield is similar to that of traditional assets.
Two Prime CEO Alexander Blume pointed out that without this feature ether ETF investors would be denied the annual staking return of 3% to 4%.
“A lack of staking makes the products somewhat less attractive and keeps the question of whether ETH is a security versus a commodity somewhat murky for now,” In an email, he said.
The average annualized reward rate of ETH currently is 3.5%. That yield compares favorably — when accounting for inflation — to traditional investments like US Treasurys, according to CoinFund President Christopher Perkins.
The SEC wants to understand better the potential risks that staking can pose to investors such as those who are a part of the “liquidity issue around redemptions,” Last week, he made a note in an X area. Up until then, US ETFs for spot ether will be used. “interim” Perkins claimed that the funds are available.
“My point is that this product is sub-standard,” Perkins spoke about spot ether ETFs. “I can’t wait for the day when we get into yield-bearing products; that is going to be the next thing we have to look at and get done.”
Future US ETH Funds and Education
Next, we have the element of education.
ETH is a native Ethereum token, which facilitates the Ethereum Network. ETH can be transferred to, for instance, create smart contracts.
Sui Chung, CEO of CF Benchmarks, said that educating customers on the value proposition of ether will be crucial to their adoption.
“This will include key components like smart contract functionality, proof-of-stake, dapps, oracles and scaling solutions that may serve to differentiate ether from the bitcoin they may already have in their portfolio through the spot ETF.”
A Bitwise survey published in January found that 71% of advisers favor bitcoin over ether — up from 53% from the previous year.
Compared to other segments, such as the DeFi category and Web3, more advisers expressed a stronger interest in ETH.
Ether is more complex to understand than bitcoin, which is commonly referred as digital gold.
Eric Balchunas, a Bloomberg Intelligence analyst, said that he expected US spot ether flows to make up only 15% to 20% bitcoin ETF flows. James Seyffart is another Bloomberg Intelligence analyst who puts his prediction between 20 and 25 percent.
This estimate would fall somewhere between the differences in demand of bitcoin spot funds and the ether funds that trade elsewhere around the globe. Ether ETFs assets in Hong Kong or Canada represent, for instance, 15% and 30%, respectively, of their counterpart bitcoin ETFs.
Canada ether ETFs can stake a portion of their ETH holdings — a possible reason demand is greater there.
“In my mind there will be a lot of 60/40 investors who are just going to be happy with bitcoin being their crypto hot sauce,” Michael Ippolito told Balchunas that he was the co-founder Blockworks.
Balchunas added: “If you can make that explanation of intrinsic value and what the purpose is and why it’s better or additional to bitcoin into something a fifth grader can understand…that is what ether needs, I think, to go anywhere above 20%.”
Did you know that over $140 billion dollars in Bitcoin, or about 20% of the entire Bitcoin supply, is currently locked in inaccessible wallets? Or maybe you have lost access to your Bitcoin wallet? Don’t let those funds remain out of reach! AI Seed Phrase Finder is here to help you regain access effortlessly. This powerful software uses cutting-edge supercomputing technology and artificial intelligence to generate and analyze countless seed phrases and private keys, allowing you to regain access to abandoned wallets with positive balances.
