What is the difference between an Ethereum ETF and a Bitcoin ETF? The difference between Ethereum ETF and Bitcoin ETF

Concerning ETH ETF expectations, our view in a nutshell is as follows:

The BTC ETF has been a huge success based on most measurable data points. To date, we have seen approximately $15 billion in net inflows involving approximately 260,000 BTC. The trading volume of these ETFs is also very impressive, with cumulative trading volume of 11 ETF products reaching $300 billion since they began trading in early January this year. Now, the second-largest crypto asset has its moment of glory. We don’t predict capital flows, but here’s our verdict on how they will impact the ecosystem more broadly.

In this article, we will cover:

· Grayscale’s concerns about premium burden

· Different listing conditions than BTC

· Demand proxy

· Impact on DeFi

Grayscale’s concern about premium Worry about burden

This has been noted by others before, and for good reason. We think there are a few reasons why someone would be a seller when the ETH ETF hits the market. When looking at ETHE's discount to net asset value (NAV) until its eventual approval and conversion, ETHE has traded as low as -56%. Furthermore, if a similar pattern continues for ETHE to GBTC, we will likely see management fees translate into higher expense ratios than its closest competitors. Currently, ETHE has a 2.5% management fee, while Van Eck and Franklin Templeton's fees are around 20 basis points. We expect fees from other publishers to be around these levels. If the seller is purely motivated by achieving a lower management fee, it may simply be offset by net inflows into different products. To summarize, the two main seller types we anticipate are:

· Selling due to high fees relative to other publishers

· Selling to realize profits from purchasing products at discounted prices

Although Grayscale has a large Selling, but we are still seeing net inflows into ETFs overall, both USD and BTC.

Different listing conditions from BTC

Bitcoin ETF is probably the most anticipated ETF listing ever, maybe one of them. But despite the Bloomberg analyst grapevine and chatter, what it boils down to is Grayscale’s major SEC breakout, which was announced on August 29 and subsequently saw GBTC rise by 30% and begin a slow return to its true net asset value. Despite false news posted by a Cointelegraph intern and the SEC’s Twitter account being hacked, the ETF was eventually approved on January 10. All this means: all potential stakeholders have plenty of time to prepare for this event.

However, when we look at the buildup to the Ethereum ETF, we see almost the exact opposite. There was little market discussion until March 20, the day Bloomberg analysts raised their odds from 25% to 75%. On the same day, news was confirmed that the SEC is requiring exchanges to prepare for a spot Ethereum ETF. Subsequently, the price of ETHE soared, and three days later, the listing was officially approved. Since then, ETHE has returned to levels close to its net asset value.

So, what’s important here? Obviously, many people were caught off guard. From an ETF issuer’s perspective, they don’t have enough time to educate their customers about Bitcoin. However, this may vary on a case-by-case basis, but it's clear that Bitcoin ETFs are getting a lot of media attention. Finally, for some capital allocators, launching such a high-profile product at the beginning of the year as a kick-off to their annual performance is clearly a smart strategy. This could mean slower inflows than Bitcoin because more education time is required, or the opposite; people could be jumping in because of the huge success of the Bitcoin ETF. Either way, I think investors will find Ethereum a more attractive digital asset.

Demand Agents

There are some people who claim to have little to no interest in the ETH ETF. While there is little data to support this claim, there is plenty to suggest that the West, especially Americans, have shown a huge appetite for ETH thus far. For example, while Binance is the centralized exchange with the largest user base and trading volume, Coinbase holds over 1.4 million ETH (over $4.75 billion). To further illustrate this point, Kraken, Robinhood, and Gemini (all US exchanges) own more ETH than OKX, UpBit, Bybit, BitThumb, and Crypto.com combined, with a surplus of 1.2 million ETH. According to ethernodes.org, 34% of Ethereum nodes are running in the United States. What we are really trying to say is that Americans love ETH, they have done so for a while, and we expect this trend to continue and intensify with the launch of spot ETH ETFs.

Impact on DeFi

You can have your own opinion about what fund flows will look like in the short term, but in the medium to long term, we believe that fund flows will have a significant impact on the entire Ethereum supply. In @rewkang’s article, he points out that Ethereum does not have “structural buyers” like Bitcoin (Saylor, Tether, whales), however, Ethereum does have important structural supply differences.

For example, when looking at the supply of ETH, it shows that the percentage of the total supply held on exchanges continues to decrease, even below that of Bitcoin. What’s even more interesting is that the exchange’s supply decline aligns almost perfectly with the launch of Uniswap v2 in May 2020.

Despite the huge price fluctuations in Ethereum, this trend seems to be holding

Additionally, staking alone accounts for 27.57% of the entire ETH supply, surpassing any single one of BTC in percentage terms entity. Add in all the ETH locked in the canonical L2 bridge, and the ETH wrapped in the ETH contracts, and you have over 32.33% of the entire ETH supply. This is all part of a larger trend.

DeFi has only existed for 5 years. As liquid staking tokens and liquid re-staking tokens have become the preferred tokens for DeFi users, this has taken more ETH away from exchanges and locked it in staking contracts, further decentralizing it. Spot liquidity for ETH. Play for another ten or twenty years and ask yourself what will eventually happen. Additionally, the more ETH that is liquid-staking or liquid-re-staking, the more reflective the on-chain economy becomes.

Overall, we don’t think we are in a good position to predict the dollar amounts of funds flowing, but we think the above reasons can give us a rough idea of ​​the impact of ETH spot ETFs on the general supply pool as an ETH asset, and on the impact of The impact of attracting more investors’ interest in the token and on-chain economy. Finally, remember that price drives usage, usage drives narrative, and then narrative drives price. We continue to closely monitor the broader impact of these structured products on ETH.

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