Ethereum Spot ETFs May Face Reduced Demand Versus Bitcoin Competitors, Bernstein Says
Ether spot exchange-traded funds (ETFs) based on Ethereum (ETH) are anticipated to attract less interest compared to their bitcoin (BTC) counterparts, according to a report by broker Bernstein released on Monday.
The analysts at Bernstein highlighted that the absence of an ETH staking feature in the ETFs could result in reduced spot conversion for ETH. They pointed out that the basis trade strategy, which involves simultaneously buying the spot ETF and selling the futures contract, may gain traction over time, contributing to the liquidity of the ETF market as prices align.
Spot ether ETFs are on the verge of being accessible to U.S. investors following the Securities and Exchange Commission’s (SEC) approval of crucial regulatory filings by issuers last month.
The authors of the report emphasized the growing significance of ETH as a primary platform for tokenization, particularly in stablecoin transactions and the tokenization of traditional assets and funds.
In terms of regulation, Ether and other digital assets are seen to require a more refined regulatory framework. Bernstein anticipates a positive shift in the narrative around cryptocurrency post the U.S. elections, especially with the increasing likelihood of a Republican victory and the pro-crypto stance of former President Trump.
Despite the recent downturn in crypto markets, the report underlined that the structural adoption cycle remains robust.
JPMorgan, a major player on Wall Street, projected that demand for spot ether ETFs is likely to be considerably lower than for bitcoin ETFs. The report cited the first-mover advantage of bitcoin, suggesting that it could potentially saturate the overall demand for crypto exchange-traded funds.
In conclusion, while Ether spot ETFs are expected to attract less demand compared to bitcoin versions, the growing institutional adoption of cryptocurrencies, the evolving use cases of Ethereum, and the shifting regulatory landscape indicate a dynamic environment for digital assets in the financial markets.
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