Ether Surpasses $3.5K Prior to ETH ETF Trading, Yet Inflow Worries Persist
Ether (ETH) has surged above the $3,500 mark in anticipation of the launch of spot exchange-traded funds (ETFs) in the United States. These ETFs are set to commence trading on Tuesday, with some observers predicting a relatively subdued initial influx of funds.
There are apprehensions surrounding Grayscale’s $9 billion ETH Trust, with worries that potential selling activities by Grayscale could counterbalance the positive impact of new capital inflows, potentially leading to downward pressure on the market. Vivien Wong, a partner at HashKey Capital’s Liquid Funds, highlighted these concerns in an email to CoinDesk.
HashKey, associated with the introduction of an Ether ETF in Hong Kong, forecasts an inflow of $3 billion within the first six months of U.S. trading. This estimate is based on the fact that Bitcoin’s market capitalization is only 30% of Ether’s, and the absence of staking mechanisms in place.
Another point of contention is Ether’s inflation rate, which contributes to an increase in token supply within the market. Wong noted that over the past month, the ETH supply has risen by approximately 60k ETH, contrary to expectations. Although there has been a reduction of around 300k ETH since the merge, sustained inflation at this pace could potentially nullify this decrease within six months, potentially transforming ETH back into an inflationary asset.
In recent trading activity, ETH managed to reverse losses from the previous session, registering a 0.57% gain over the past 24 hours, as per data from CoinGecko. This performance outpaced the broader CoinDesk 20 (CD20) index, which experienced a 1.7% decline.
On Monday, eight issuers, including BlackRock, obtained approval for their latest S-1 filings from the U.S. Securities and Exchange Commission. Observers in the market are engaged in discussions regarding whether the performance of ETH ETFs will mirror that of their Bitcoin counterparts, which were launched in January and have since attracted over $17 billion in net inflows.
Danny Chong, co-founder of Tranchess, emphasized the potential of ETH ETFs to outperform Bitcoin ETFs due to Ethereum’s enhanced utility, including features like liquid staking. Chong expressed optimism that with a larger investor base, ETH ETFs could deliver stronger performance and enhance liquidity in the market.
Citi’s projections suggest an inflow of approximately $5.4 billion within the first six months, citing factors such as the absence of staking and Bitcoin’s first-mover advantage as reasons why the performance might fall short. Gemini estimates the figure at $5 billion, while JPMorgan anticipates inflows of “as much as $3 billion,” potentially reaching $6 billion if staking mechanisms were permitted.
