Ethereum (ETH) spot exchange-traded funds (ETFs) are expected to attract demand, but are likely to be on a smaller scale compared to their Bitcoin (BTC) counterparts, according to a research report published by Bernstein.
Ethereum Spot ETFs May See Lower Demand Compared to Bitcoin Peers, Bernstein Report Says
The report highlights that ETH spot ETFs, once approved for trading, will appeal to the same demand sources as BTC ETFs, but will not reach the same volume.
Analysts Gautam Chhugani and Mahika Sapra noted that the lack of ETH staking feature in the ETF could limit conversion to spot ETH.
They also noted that basis trading, which means buying the spot ETF and selling the futures contract simultaneously to wait for price convergence, will gain traction over time by adding to liquidity in the ETF market.
The U.S. Securities and Exchange Commission (SEC) recently approved important regulatory filings from issuers, bringing spot ether ETFs closer to becoming available to investors in the United States.
“As the primary tokenization platform, ETH has a strong use case for both stablecoin payments and the tokenization of traditional assets and funds,” Chhugani and Sapra wrote.
Emphasizing the need for a more robust regulatory framework for Ethereum and other digital assets, the authors suggest that the narrative may improve in the US elections later this year, especially with the increased likelihood of Republicans winning and Trump's pro-crypto stance.
Bernstein's report argued that despite recent downturns in crypto markets, “the structural adoption cycle remains intact.”
However, Wall Street giant JPMorgan reiterated the sentiment of lower demand for ETH ETFs compared to BTC ETFs.
In a report published last month, JPMorgan noted that Bitcoin's first-mover advantage could potentially saturate overall demand for crypto exchange-traded funds.
*This is not investment advice.