Half a year after the first spot-based bitcoin ETFs were approved in the US, it's now the turn of the second largest cryptocurrency, Ethereum (ETH). The Securities and Exchange Commission (SEC) gave the green light for trading to begin today.
Since November 2023, BlackRock, Fidelity and other fund providers have been racing to launch the first spot-based ETF on Ethereum (ETH). Ideally, the contenders want to replicate the overwhelming success of bitcoin ETFs. Last week alone, bitcoin products saw $1.5 billion in net inflows.
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SEC takes time to approve ETH ETFs
For a long time, the market considered the launch of an Ethereum ETF unlikely. The SEC, which oversees securities and exchanges, has been critical of the second-largest cryptocurrency by market capitalization for years. The agency would have preferred to classify the asset as a security. In late May, however, the SEC abandoned its original plan and took the first step toward approving Ethereum ETFs. Providers then had to wait another two months. At the last minute, in order to maintain the July 23, 2024 launch date, the SEC finally gave the go-ahead last night for the following products (in order of management fee):
- Grayscale Ethereum Mini Trust (ETH) - 0.15%
- Franklin Ethereum ETF (EZET) - 0.19%
- VanEck Ethereum ETF (ETHV) - 0.20%
- Bitwise Ethereum ETF (ETHW) - 0.20%
- 21Shares Core Ethereum ETF (CETH) - 0.21%
- Fidelity Ethereum Fund (FETH) - 0.25%
- iShares Ethereum Trust (ETHA) - 0.25%
- Invesco Galaxy Ethereum ETF (QETH) - 0.25%
- Grayscale Ethereum Trust (ETHE) - 2.50%
Will Ethereum ETFs keep up with the bitcoin products?
The launch of the Ethereum products may be off for a bumpier start. Bitcoin had a strong debut in January as the first digital asset to be offered as a spot ETF on Wall Street. Moreover, as an inflation hedge and "digital gold," bitcoin is a natural fit for a portfolio. Ethereum (ETH), on the other hand, should be viewed as a technology investment. This may be harder for traditional investors to grasp. At least that's what the market expects. The ratio of Ethereum to Bitcoin (ETH/BTC) is at historic lows from the 2022 bear market.
Ethereum vs. Bitcoin (ETH/BTC) / Charts: Tradingview
21Shares, the Swiss provider behind the third-largest spot bitcoin ETF, confirmed these rather cautious expectations for Ethereum products. Head of Research Adrian Fritz told CVJ.CH that about 10-15% of the bitcoin ETF inflows seem realistic for the Ethereum products. Specifically, this could mean up to $1.5 billion in inflows within the first two months. Ultimately, Ethereum's value proposition is more complex and will require more time and education. Potential investors should be aware of the fundamental differences between the two assets.
"Some investors may consider moving some of their capital from bitcoin to Ethereum in order to diversify their digital assets. However, it is important to recognize that while both assets are based on blockchain technology, their value propositions are fundamentally different. Bitcoin is often viewed as digital gold and is typically classified as a commodity. In contrast, Ethereum is a unique case. As a platform that drives innovation and powers the next generation of the Internet, Ethereum is more akin to a technology investment. Therefore, it should be considered alongside other tech stocks as it plays a central role in the modern technological infrastructure." - Adrian Fritz, Head of Research at 21Shares
