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Spot Ethereum ETFs will be available for trading once approved. However, Bernstein points out a downside for these ETFs. According to Bernstein, spot Ethereum ETFs may not be met with as much interest as spot Bitcoin ETFs. The main reason is the lack of staking features for Ethereum in ETFs.
Potential Lack of Demand for Spot Ethereum ETFs
Bernstein analysts Gautam Chhugani and Mahika Sapra stated that the demand for spot Ethereum ETFs will not reach the levels seen by their Bitcoin counterparts, but that basis trading could still be attractive to investors over time. Basis trading involves buying the spot Ethereum ETF and simultaneously selling the futures contract, waiting for the prices to converge. This strategy could contribute to healthy liquidity in the ETF market despite low overall demand.
As seen so far, the SEC has played a very important role in the adoption and success of crypto-focused ETFs. This is because this institution is at the center of the legal process. Bernstein’s report notes that Ethereum, as a primary platform for tokenization, has significant use cases, including stablecoin payments and the tokenization of traditional assets and funds.
These use cases support Ethereum’s long-term value proposition. However, the narrative around cryptocurrencies needs further development, and Bernstein expects this to happen during the US elections later this year. The possibility of a Republican victory, combined with former President Trump’s pro-crypto stance, could lead to a more favorable regulatory environment for cryptocurrencies.
JPMorgan Also Predicts Low Inflows for Spot Ethereum ETFs
Despite recent declines in the crypto market, institutional adoption of cryptocurrencies continues to rise. Bernstein emphasizes that the structural adoption cycle for cryptocurrencies remains intact.
Echoing Bernstein’s views, Wall Street giant JPMorgan also predicts lower demand for spot Ethereum ETFs compared to spot Bitcoin ETFs. JPMorgan particularly highlights Bitcoin’s first-mover advantage. Additionally, Bitcoin’s established dominance in the crypto-focused ETF market is noted.
These factors are considered to be ones that could satisfy the overall demand for crypto ETFs. Bitcoin’s established presence and familiarity among investors provide an advantage that new offerings like spot Ethereum ETFs may struggle to overcome.
