The launch of US exchange-traded funds (ETFs) for Ethereum (ETH), the second-largest cryptocurrency, could face significantly less demand compared to spot Bitcoin products, casting a shadow on Ethereum's outlook, according to analysts.
Doubts Over US Ethereum ETF Demand Pose Challenge for Second-Largest Cryptocurrency
BlackRock Inc. and Fidelity Investments are among the issuers seeking to list Ethereum ETFs pending final approvals from the Securities and Exchange Commission (SEC).
But JPMorgan Chase & Co. strategists predict that net inflows into Ethereum ETFs will be much smaller than the $15.3 billion flowing into Bitcoin ETFs this year.
Five-month-old Bitcoin ETFs have capitalized on a narrative that positions Bitcoin as “digital gold,” a concept that Ethereum lacks.
Additionally, Ethereum ETFs will not offer staking rewards for blockchain maintenance, a return that can be achieved by holding the token directly.
“Ether does not have the profile of Bitcoin,” said Caroline Bowler, CEO of BTC Markets Pty. Bitcoin's $1.4 trillion market cap is three times larger than Ethereum's. “It won't have the same impact,” he said.
Last month, the SEC unexpectedly pivoted to approving spot Ethereum ETFs after allowing Bitcoin funds following a court reversal in 2023.
This decision briefly boosted the price of Ethereum, but the token's 109% rise last year fell short of Bitcoin's 169% rise, which reached a record high in March.
JPMorgan strategists led by Nikolaos Panigirtzoglou estimate that prospective Ether ETFs would attract a “modest” $1 billion to $3 billion in net inflows over the remainder of the year.
These products may struggle to reach the 20% of Bitcoin ETF assets in the U.S., which now total $62.5 billion, according to Bloomberg Intelligence Senior ETF Analyst Eric Balchunas.
*This is not investment advice.