Ethereum ETF Launch May Benefit from Delay, Say Experts
The prospect of a spot Ethereum ETF hitting the market anytime soon is becoming increasingly unlikely. However, some crypto experts argue that this delay may actually work in favor of the industry.
According to Matt Hougan, CIO of Bitwise, if spot Ethereum ETFs were to launch in December rather than May, they would attract more assets. He believes that traditional finance needs more time to digest Bitcoin ETFs before moving on to Ethereum.
Bitcoin ETFs Outperform Expectations
Since their launch on January 11, Bitcoin spot ETFs have absorbed $12 billion in net inflows. Bitwise itself holds nearly $2 billion in BTC on behalf of its clients. This success has led Hougan to argue that there is still significant room for greater adoption of Bitcoin ETFs by the traditional financial world.
Hougan also highlights specific target markets like corporations and wirehouses that are just beginning to embrace Bitcoin as an asset.
Ethereum Lags Behind Bitcoin
However, a survey conducted by Bitwise in early January revealed less interest in Ethereum among financial advisors. Last year, 71% of respondents favored Bitcoin compared to a roughly 50/50 split in 2022.
Despite this, Hougan believes that stablecoins hold the most promise for real-world use and predicts that the stablecoin market will be worth trillions by the end of 2025.
Spot Ethereum ETF vs Bitcoin-Based Counterparts
Bloomberg’s ETF experts share a similar view. Analyst Eric Balchunas states that an Ethereum spot ETF would be “small potatoes” compared to its Bitcoin-based counterparts.
Both Balchunas and his associate, James Seyffart, do not believe that Ethereum ETFs will receive approval by the SEC’s final deadline on May 23. They argue that regulators need to have conversations with issuers as soon as possible, which hasn’t been happening.
Staking and Legal Issues
Some issuers, including Fidelity and Ark, face additional challenges due to their plans to stake a portion of their fund’s assets on the Ethereum network. Staking and proof-of-stake cryptocurrencies are already in uncertain legal territory with the SEC.
James Butterfill, Head of Research at CoinShares, predicts that an SEC decision on Ethereum ETFs may be delayed until the third quarter of 2024 or later due to unresolved issues surrounding staking.
Given the SEC’s history of postponements, investors should be prepared for further delays. The optimism placed on a May approval may ultimately lead to disappointment.
Hot Take: Delayed Launch May Benefit Ethereum ETF
The odds of a spot Ethereum ETF launching in the near future are diminishing. However, this delay may actually work in favor of the industry and potential investors. Here’s why:
Time for Traditional Finance to Adapt
The delay in launching a spot Ethereum ETF allows traditional finance more time to adapt and familiarize itself with Bitcoin ETFs. By first establishing a strong foundation with Bitcoin, financial institutions can better understand and navigate the crypto market before moving on to Ethereum.
Bitcoin ETFs Outperform Expectations
The success of Bitcoin spot ETFs since their launch is a testament to their potential in the traditional financial world. With $12 billion in net inflows and growing interest from corporations and wirehouses, there is still significant room for greater adoption of Bitcoin ETFs.
Ethereum’s Future Potential
While Ethereum may not be the immediate focus for financial advisors, experts like Matt Hougan believe that stablecoins hold the most promise for real-world use. The stablecoin market is projected to reach trillions by 2025, indicating a growing demand for this type of asset.
Challenges and Legal Issues
The incorporation of staking in Ethereum ETFs poses legal challenges, particularly with regards to the SEC. Some issuers, such as Fidelity and Ark, plan to stake a portion of their fund’s assets on the Ethereum network. However, staking and proof-of-stake cryptocurrencies are currently under scrutiny from the SEC, adding further complexity to the approval process.
Expect Further Delays
Given the SEC’s history of postponements and the unresolved issues surrounding staking, it is likely that the approval of Ethereum ETFs will be delayed beyond the May 23 deadline. Investors should manage their expectations and be prepared for potential disappointment.
In conclusion, while the launch of a spot Ethereum ETF may be delayed, this delay can provide valuable time for traditional finance to adapt and learn from Bitcoin ETFs. The success of Bitcoin spot ETFs demonstrates the potential for greater adoption in the traditional financial world. Additionally, stablecoins hold promise for real-world use and are expected to become a multi-trillion-dollar market in the coming years. However, legal challenges surrounding staking in Ethereum ETFs may further delay their approval by the SEC. Investors should remain patient and manage their expectations accordingly.
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