Ether ETFs Set to Launch This Month, but Pundits Disagree on the Impact the Funds\' Debut Will Have on the Market

With spot Ethereum exchange-traded funds (ETFs) expected to launch this month, pundits disagree on what the funds' debut will mean for the markets.

The launch of spot Ethereum exchange-traded funds (ETFs) this month has sparked varying predictions among pundits regarding its impact on the markets.

Analysts are debating whether the funds’ debut will echo the launch of spot Bitcoin ETFs, which saw BTC's price surge 58% within nine weeks, culminating in its current all-time high of $73,738.

While some anticipate a groundbreaking event, others expect a more muted response to the funds' launch.

Comparing Ether ETFs to Bitcoin ETFs

According to Ryan Lee, chief analyst at Bitget Research, Ethereum ETFs are likely to generate lower trading volumes compared to Bitcoin ETFs due to their distinct market appeal.

"When Ethereum ETFs start trading, ETH will capture about 2.5% of its market cap. If this bull case plays out, the spot Ethereum ETF might see $11.55 billion in assets under management," he said.

Galaxy Research also predicts slower inflows into spot Ethereum ETFs compared to their Bitcoin counterparts.

"We estimate that spot Ethereum ETPs will see approximately $5 billion in net inflows in the first five months of trading," said Charles Yu, Vice President of Research at Galaxy.

However, many onlookers hold bullish expectations for the price of Ethereum once ETFs debut.

Steno Research predicts that ETH could potentially reach at least $6,500 later this year following the launch of Ether ETFs — surpassing ETH's previous all-time high by 33%.

Standard Chartered offers an even more optimistic forecast, suggesting the approval of spot Ethereum ETFs could bring up to $45 billion in inflows within the first 12 months, potentially driving ETH's price to $8,000 by the end of 2024.

Others, like Jupiter Zheng, partner at HashKey Capital's Liquid Fund, expect the ETF launch news to trigger a brief and modest rally, followed by a strong 'sell-the-news' event.

Lack of Staking Rewards in Ethereum ETFs

One factor dampening enthusiasm, according to analysts, is the absence of staking rewards from the ETF filings.

Since September 2022, Ethereum has utilized the Proof of Stake consensus to derive its security from staking. Node operators must lock up at least 32 ETH as collateral to participate in validating transactions and securing the network. In return, stakers receive a share of newly created ETH as rewards.

In May, BlackRock, Grayscale, and Bitwise updated their SEC applications to remove provisions concerning staking. The moves came following dialogue between the prospective issuers and the SEC.

“Non-staked Ethereum incurs an opportunity cost by foregoing the benefits of staking rewards, including inflation rewards, priority fees, and MEV income,” said Lee.

"This opportunity cost makes spot Ethereum ETFs less attractive to crypto-savvy institutions… However, traditional investment institutions constrained by corporate regulations and legal frameworks can only gain exposure through ETFs and wouldn't face the opportunity cost of staking."

Fee Waivers to Attract Institutional Investors

Several ETF issuers have announced fee waivers for their spot Ethereum funds to attract institutional investments.

Franklin Templeton revealed a 0.19% sponsor fee but will waive it for the first $10 billion in assets for six months. Similarly, VanEck announced a 0.20% sponsor fee, which will be waived for the initial $1.5 billion until an unspecified date in 2025.

Notably, both BlackRock and Fidelity haven't disclosed their fees yet.

Meanwhile, the highly anticipated launch of spot Ethereum ETFs has encountered delays. Analysts initially expected approval by July 2, but the U.S. Securities and Exchange Commission (SEC) has requested issuers submit revised filings by July 8.

As such, Nate Geraci, co-founder of ETF Institute, predicts the funds will launch during the week of July 15.

The price of ETH is up 1.2% over the past 24 hours, according to CoinGecko.

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