Can Ethereum ETFs Replicate Bitcoin’s Triumph and Generate Similar Market Excitement?

The debut of Ethereum exchange-traded funds (ETFs) on July 23 garnered substantial attention from investors, with over $100 million in initial inflows. This marked a turnaround from the preceding four days, which saw outflows totaling $33.67 million for U.S. spot Ether ETFs.

Despite the positive influx, Grayscale’s Ethereum Trust (ETHE) experienced an outflow of $120.28 million, creating a mixed picture in the market. Analysts in the crypto sphere anticipate that Ethereum ETFs will likely follow a trajectory akin to Bitcoin.

Katalin Tischhauser, Sygnum Bank’s Head of Investment Research and a former Goldman Sachs executive, projects a bright future for spot Ether ETFs. She envisions these funds attracting up to $10 billion in assets within their inaugural year. Tischhauser also foresees Bitcoin ETFs drawing in between $30 billion and $50 billion in their initial year, with Ethereum ETFs mirroring this trend.

Tischhauser underscores Ethereum’s appeal over Bitcoin, noting that while Bitcoin is primarily viewed as a store of value, Ethereum derives value from its revenues and cash flows. This revenue-generating aspect makes Ethereum more enticing to conventional institutional investors compared to Bitcoin’s association with “digital gold.”

In a bid to entice institutional investors, several ETF issuers are offering fee waivers for their spot Ethereum funds. Franklin Templeton, for instance, will charge a 0.19% sponsor fee but will waive it for the first $10 billion in assets for half a year. Bitwise and VanEck are levying a 0.20% fee until a specified time in 2025.

BlackRock has updated its registration for its spot Ethereum ETF, ETHA, to include a 0.25% management fee. Additionally, Grayscale has rolled out its Grayscale Ethereum Mini Trust with a 0.25% fee.

However, the absence of staking rewards from these ETFs has dampened some enthusiasm. In May, BlackRock, Grayscale, and Bitwise eliminated staking provisions from their SEC applications following discussions with the SEC. Traditional investment institutions, bound by regulatory constraints, can solely invest through ETFs, thereby missing out on staking benefits.

The Ethereum ETF landscape is still evolving, prompting speculation about its trajectory in the coming year. Where do you foresee this market heading next?