Ethereum ETFs May Not Mirror Bitcoin ETFs' Launch Success, Warns Expert
Summary:
An industry expert has advised that Ethereum (ETH) exchange-traded funds may not experience the same initial inflow of funds as Bitcoin ETFs, due to the complexity in valuing Ethereum's use cases. The launch day for Bitcoin ETFs surpassed expectations with $655.2m in inflows. While there are tried-and-true metrics for appraising Bitcoin's value, Ethereum's value assessment proves more difficult due to being tightly linked to tech-driven use cases. Consequently, an industry executive believes Ethereum ETFs may not garner a similar level of initial investment as Bitcoin ETFs.
An industry executive has cautioned that Ethereum (ETH) exchange-traded funds may not attract the same surge in initial investment as their Bitcoin counterparts, largely because of difficulties in precisely valuing the asset's use cases. The day Bitcoin ETFs began trading on January 11 brought in $655.2 million, surpassing the industry's predicted uptake. Bitcoin provides a stable store of value, while Ethereum, heavily tied to technological applications, presents a more complex valuation puzzle, states Stephen Richardson, Fireblocks' director of financial markets. There lacks a generally accepted method for assessing the Ethereum blockchain's potential use or application, Richardson said. Because of these uncertainties, the anticipated initial inflows into Ether ETFs may not parallel those experienced with Bitcoin ETFs, Richardson suggested. On their first day, Bitwise's BITB product drew the largest inflows at $237.9 million, followed by Fidelity's FBTC ($227 million) and BlackRock’s IBIT ($111.7 million), according to BitMEX Research. Richardson proposed a means of assessing Ethereum could be via the total value locked, an existing metric for Ethereum and layer two blockchains. Recently approved spot Ether ETF applicant, VanEck, also recommended transaction volume, number of users, and validators as possible evaluation tools. Richardson advocated Ethereum as the “top contender” for dominating the digital native world, attracting both retail and institutional investors. Ethereum's value, he argued, relies on the applications being developed on its platform, the adoption of which investors would essentially be betting on. However, Markus Thielen, 10x Research head of research, argued that Ethereum's current revenue seems “negligible” compared to its $455 billion market capitalization, suggesting it may not be a “feasible, solid, cash-flow generating investment.” On May 23, the SEC approved 19b-4 applications from eight different entities, including VanEck, BlackRock, and Fidelity, to launch spot Ether ETFs. The funds can begin trading once the SEC approves their Form S-1 filings. Analysts from Bloomberg ETF predict the Ether ETFs will attract 10-20% of the influx Bitcoin ETFs enjoyed. Farside Investors reported that since they launched around 4.5 months ago, spot Bitcoin ETFs have brought in $13.8 billion. Even 15% of this would equate to $2.07 billion invested in Ether ETFs, a figure industry insiders would view as impressive.
Published At
6/3/2024 8:06:32 AM
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