Ethereum ETFs begin trading on Tuesday. Here’s what you need to know.

New place ETFs for Ethereum—which will allow investors to buy the second most popular cryptocurrency in the form of shares—are expected to begin trading on Tuesday, July 23. The Securities and Exchange Commission has given the green light to at least three funds to enter the market that day, according to sources he told Reutersalthough it is believed that a total of eight Ethereum ETFs will be launched simultaneously.

The instruments follow in the footsteps of the eleven spot Bitcoin trading ETFs. Having amassed more than $54 billion in assets under management since launching in January, Bitcoin is up 47% this year. Here’s everything you need to know about their Ethereum counterparts.

What is a Spot Ether ETF?

Ether is the native cryptocurrency of the Ethereum blockchain. Despite the SEC reservationsEther is legally considered a commodity, but the corresponding ETFs will be securities.

ETFs first appeared on the market in 1993. The funds pool together a basket of securities, such as a handful of different energy stocks, and their price aligns with the indexes they track. They are listed on an exchange and can be traded during market hours, thus operating like stocks.

Spot Ether ETFs will track the spot, or current, price of Ether. The products give investors access to the underlying cryptocurrency without having to own a cryptocurrency wallet. The ETFs will be set up as grant trusts, meaning investors will own a portion of Ether held by the trust.

Who issues them and what are the rates?

Eight asset managers propose to offer Ethereum ETFs: Black rockArk Invest/21Shares, VanEck, Grayscale, Fidelity, Bitwise, Franklin Templeton, and Invesco/Galaxy Digital. Each instrument will be nearly identical, so the fees charged to investors are competitive. For now, we know that Franklin Templeton will charge 0.19%, VanEck will charge 0.20%, and Invesco and Galaxy Digital will charge a fee of 0.25% for its jointly deposited ETF.

The full list of fees will be revealed when the final registration statements, or S-1s, are filed with the SEC. That will happen Tuesday, if trading begins on all eight.

Where can I access it?

They will be listed on QuotationChicago Board Options Exchange (CBOE) and New York Stock Exchange.

Why should someone buy an Ethereum ETF?

Bitcoin and Ether tokens represent units of ownership, and therefore value, of an underlying blockchain. Beyond which are very different.

While Bitcoin may be a long-term hedge against inflation, Ethereum is closer to a technology investment. Blockchain’s main premise is “to cut out the middleman and enable 24/7 uptime in financial services, such as trading and lending, as well as tokenization, digital collectibles, and digital identity,” Vetle Lunde, senior analyst at K33 Research, told Fortune.

While cryptocurrency markets are closely correlated for now, that may not always be the case, he adds. Thus, Ether ETFs allow investors to diversify the corners of the cryptocurrency economy they want to invest in.

Will they be as popular as spot Bitcoin ETFs?

Demand for the funds will be 20% of that for spot Bitcoin ETFs, Bloomberg ETF analyst James Seyffart told Fortune. That forecast is because Ether’s market cap is about a third the size of Bitcoin. Plus, he added, ETFs won’t have a key advantage in holding Ether: Investors won’t be allowed to polethat generate returns. But even at this smaller size, they would be “extremely successful” by any ETF launch standard, Seyffart says. Similarly, K33 Research predicts inflows of $4 billion during the first six months of trading, a quarter of the spot Bitcoin ETFs.

When judging their success, it’s crucial to evaluate performance after six months of trading, rather than simply on “game day” and the first few weeks, Leah Wald, CEO and president of Cyberpunk Holdings Inc., told Fortune. With their summer launches, they’ll hit the market when trading is typically “more muted,” she noted. Success should also be judged on volume and spreads, rather than just inflows, as the health of those metrics puts long-term AUM growth front and center, she added, as investors feel comfortable allocating dollars to these new names.

Who will invest in them?

Institutional investors, such as hedge funds, pension funds, banks and endowments. Retail investors will also be accessing them, either by purchasing them directly or through portfolio allocations via wealth advisors. The latter group will likely dominate the first six months of trading, as Q1 13Fs for spot Bitcoin ETFs reveal that over 80% of the total AUM came from non-professional investors.

What impact will ETFs have on the cryptocurrency market?

If K33’s forecast of $4 billion inflows over six months is correct, at current prices, that would mean 1% of the Ether in circulation would be absorbed by ETFs by the end of the year. That absorption is “well positioned” to boost the price of Ether in the second half of the year, Lunde says.

The inflows would also be bullish for the broader market, as history suggests. New capital flowing into Bitcoin via ETFs has increased the cryptocurrency’s market cap by 46% in 2024, according to K33. Lunde expects the products “could further expand the strength of the overall market” as they allow marginal capital to enter the market. Additionally, Bitcoin ETF investors have “proven to handle volatility with grace, and flows have been robust even during deep corrections,” Lunde says, suggesting ETFs can open the market to new investors committed to the long term.

Finally, since BlackRock, a traditional finance giant, is issuing one of the funds, it shows that the firm is diving deeper into cryptocurrencies. This gives the sector a “strong and much-needed stamp of approval,” he says.

Recommended newsletter:

CEO Daily provides key context for the news leaders need to know from across the business world. Every weekday morning, more than 125,000 readers rely on CEO Daily for insights into and from within the C-suite. subscribe now.

Fuente