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BlackRock’s Spot Ethereum ETF Begins Premarket Trading Despite Muted Demand Forecast
Key points
- BlackRock’s Ethereum ETF began pre-market trading this morning, July 23, 2024, following SEC approval.
- Analysts estimate that ETF inflows will reach $5.4 billion within six months.
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BlackRock’s Spot Ethereum ETF Launches pre-market negotiation early Tuesday morning, after the SEC Approves More Spot Ethereum ETFs.
This development allows traditional investors to invest directly in Ethereum without having to manage the digital asset themselves, although the functionality for staking and other stake-based derivatives was removed prior to approval.
In a video ad for his Ethereum ETF, Jay Jacobs, head of thematic and active ETFs at BlackRock in the US, said:
“While many see Bitcoin’s main appeal in its scarcity, many find Ethereum’s appeal in its utility. […] You could think of Ethereum as a global platform for applications that run without centralized intermediaries.”
Here’s BlackRock’s Ether Pitch for Regular Markets @JayJacobsCFA: “While many see Bitcoin’s main appeal in its scarcity, many find Ethereum’s appeal in its utility. You could think of Ethereum as a global platform for applications that run without decentralized intermediaries.” $ETHA photo.twitter.com/ffyglfSTiB
— Eric Balchunas (@EricBalchunas) July 22, 2024
The SEC approval of major asset management firms, including Fidelity, Grayscale, and Franklin Templeton, is a major milestone for Ethereum and the broader cryptocurrency market. These ETFs are scheduled to begin trading today at 9:30 AM EDT. At the time of writing, Ethereum is trading around $3,525, up 1% over the past 24 hours, according to CoinGecko data.
While some analysts predict that these ETFs could see inflows of up to $5.4 billion in the first six months, algorithmic trading firm Wintermute offers a more conservative outlook. The firm expects lower-than-expected demand, projecting inflows closer to $3.2 billion to $4 billion. Wintermute predicts that Ethereum ETFs will see 15% to 20% of the inflow seen for Bitcoin ETFs, potentially leading to an 18% to 24% price increase for ETH.
Two Factors for ‘Muted Demand’ on Ethereum ETFs
Wintermute attributes its less optimistic forecast to two key factors.
First, the lack of a staking mechanism within ETFs could reduce Ethereum’s attractiveness as an investment vehicle. Staking, a key component of Ethereum’s security model since its transition to proof-of-stake in 2022, allows users to earn rewards by delegating tokens to the network.
The inability to stake Ethereum in these ETFs could make them less attractive to investors seeking yield. Previous Crypto Briefing coverage on this issue explains nuances In detail.
Wintermute also cites the lack of a shared narrative to attract investors as a potential obstacle for Ether ETFs. Unlike Bitcoin, which has successfully leveraged the “digital gold” narrative, Ethereum’s more complex ecosystem and diverse applications could make it difficult to present a unified investment thesis to potential ETF buyers.
Despite these challenges, Ethereum’s dual functionality as a digital currency and a platform for decentralized applications and smart contracts could attract investors interested in technological innovations and diverse blockchain applications, Wintermute argues. The launch of Ethereum ETFs is a significant step in making cryptocurrency investing more accessible to traditional investors, potentially impacting both the cryptocurrency market and the broader financial landscape.
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