Bernstein Predicts Lower Demand for Ethereum ETFs

Spot exchange-traded funds (ETFs) based on Ethereum are expected to see less demand compared to their Bitcoin counterparts due to the absence of staking. This is according to a report by CoinDesk, citing Bernstein.

Analysts believe that upon the launch of ETH-ETF trading, funds will be attracted from the same interested parties, albeit on a limited scale. 

“ETH will not see such a high conversion into exchange-traded funds due to the lack of a staking feature,” the experts added. 

However, Bernstein noted that basis trades are likely to find buyers, contributing to healthy liquidity in the ETF market. This trading strategy involves simultaneously buying a spot fund and selling a futures contract, then waiting for the prices to converge.

On May 23, the SEC approved 19b-4 applications from issuers of spot Ethereum ETFs. Trading will commence once the agency signs off on the registration statements on Form S-1. In June, BlackRock, VanEck, Franklin Templeton, Grayscale Investments, Invesco Galaxy, and 21Shares submitted updated documents. 

Analysts also emphasized the need for a “more advanced regulatory regime.” They expect the situation to improve as the U.S. elections approach.

“Ethereum, as a leading tokenization platform, creates a powerful use case for both stablecoin payments and the migration of traditional assets to the blockchain,” Bernstein stated.

Despite the recent downturn in the crypto market, the “structural adoption cycle [of digital assets] remains unchanged,” the experts concluded.

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On June 25, asset manager VanEck filed a Form 8-A for its spot Ethereum ETF. Approval of the document will allow the company to begin trading once the instrument is launched. 

Bloomberg exchange analyst Eric Balchunas described the event as “just part of the process” of registering products. 

VanEck just filed 8-A form for spot Eth, which is just part of process, but.. should be noted that they filed their 8-A for spot bitcoin exactly 7 days before launch. Good sign for our July 2nd over/under (7 days from now). But again, anything poss. Sure we’ll hear more soon.. https://t.co/2BlkDnWhrz

— Eric Balchunas (@EricBalchunas) June 25, 2024

“[…] it should be noted that VanEck filed their 8-A for the spot bitcoin fund exactly seven days before its launch. A good sign for our July 2nd over/under (seven days from now). But again, anything is possible. We will hear more soon,” he added. 

Earlier, Balchunas reported on the postponement of the spot Ethereum ETF launch to early July after issuers received comments on their Form S-1 filings.

Back on June 13, SEC Chairman Gary Gensler noted that he expects the bureaucratic procedures for launching exchange-traded funds based on the second-largest cryptocurrency by market capitalization to be completed by the end of summer.