Markets
Ether (ETH) ETFs May Face Disappointing Demand, Predict Wintermute and Kaiko
A pair of major cryptocurrency companies see relatively low-key debuts from exchange-traded funds that hold Ethereum ether (ETH).
Wintermute, a major market maker, predicts that ether ETFs will attract at most $4 billion in investor inflows over the next year. That’s below the $4.5 billion to $6.5 billion most analysts had forecast, and that latter figure is already about 62% less than the $17 billion bitcoin ETFs have so far attracted since they began trading in the U.S. six months ago.
However, Wintermute predicts that the price of ether will increase by up to 24% over the next 12 months, driven by such inflows.
The ETFs received the final blessing from regulators on Monday evening, meaning issuers including BlackRock, Fidelity, Grayscale, VanEck, Franklin Templeton, Bitwise, 21Shares and Invesco can begin offering the funds, which will be available for trading on Tuesday.
U.S. regulators have balked at issuers’ requests to allow ether ETFs to stake their cryptocurrencies, which would have generated revenue that could be shared with investors. “This loss reduces the competitiveness of ETH ETFs versus direct holdings, where investors can still benefit from staking,” Wintermute said in its report.
Research firm Kaiko shares a similar perspective based on previous Ethereum-focused launches.
“The launch of futures-based ETH ETFs in the U.S. late last year was met with disappointing demand,” Will Cai, head of indices at Kaiko, said in a report. “All eyes are on the launch of spot ETFs with high hopes for a rapid accumulation of assets.”
He said that regardless of the long-term trend, the price of ether will likely be “sensitive” to inflow numbers in the early days of trading.
According to data tracked by Kaiko, ether’s implied volatility increased significantly over the weekend, with the contracts closest to expiration (July 26) jumping from 59% to 67%.
“This suggests lower sentiment around the ETH launch, as traders are willing to pay higher premiums to hedge their bets,” the report reads.
UPDATE (July 22, 2024, 21:19 UTC): Updates to report that the ETFs have received final approval and can begin trading on Tuesday.