- The SEC head suggested the registration of S-1 forms for an ETH-ETF could occur by summer’s end.
- The absence of staking in an Ethereum-based ETF may limit institutional demand for the product.
- JPMorgan expressed doubts about sustaining high inflows into BTC-ETFs.
Approval of the S-1 for an Ethereum-ETF is possible “by the end of this summer,” according to SEC Chairman Gary Gensler, reports The Block.
The official outlined the timeline in response to lawmakers’ questions during hearings in the U.S. Senate Appropriations Committee.
“Individual issuers are still going through the registration process. Everything is going smoothly,” Gensler explained.
On May 23, the Commission approved 19b-4 proposals from issuers of spot Ethereum-based ETFs. Trading will commence once the agency signs the S-1 registration statements.
Senator William Hagerty of Tennessee criticized Gensler for creating “roadblocks” that force crypto companies to leave the U.S.
“You are not prioritizing rule-making in areas that urgently need it. […]. Other jurisdictions are setting them. […] With the SEC and CFTC, we face constant obstacles and a lack of clarity,” he lamented.
A report presented on June 13 by Coinbase and The Block showed a decline in the share of U.S.-based firms from 40% to 26% over the past five years.
Staking as an Advantage
In an interview with the publication, cryptocurrency trader Gordon Grant noted a decline in institutional investor interest in ETH-ETF due to issuers’ refusal to integrate staking into the product.
The expert suggested that many would consider purchasing the instrument only after the implementation of the staking option. Until then, major players will prefer on-chain alternatives.
According to Grant, unlike Bitcoin, direct ownership of Ethereum offers institutions a more significant yield advantage compared to ETH-ETF.
In May, issuers excluded the staking option from products due to the risk of the second-largest cryptocurrency by market cap being classified as a security. JPMorgan predicted significantly lower demand for these instruments compared to digital gold-based ETFs.
They believe that by the end of 2024, net inflows into ETH-ETF will range from $1 billion to $3 billion. However, this figure could triple if issuers reinstate staking at some point.
Earlier, Animoca Brands co-founder Yat Siu stated that Hong Kong might allow the staking option in Ethereum-based ETFs. A positive outcome is “almost a foregone conclusion,” he added.
“If there are no significant developments in staking within a year, I would say that the election outcome will be another determining factor in how quickly this happens in the U.S.,” the expert commented.
JPMorgan’s Skeptics
An inflow into spot Bitcoin-ETFs amounting to $15.5 billion may not continue, according to JPMorgan.
Specialists explained their skepticism by citing the current high prices of digital gold relative to its traditional counterpart and the cost of mining.
They stated that if the current trend persists, the net inflow for the year as a whole will be approximately $26 billion.
Experts emphasized that many investors may have shifted from holding coins on CEX in favor of ETFs due to economic efficiency, liquidity, and regulatory advantages.
This shift is evident in the reduction of Bitcoin reserves on exchanges by 220,000 BTC (~$13 billion) since the launch of exchange-traded products in January.
With adjustments, the net inflow into ETFs amounts to approximately $12 billion.
In May, JPMorgan stated a “cautious” stance on cryptocurrencies for the near term due to a lack of drivers and declining retail investor interest.
Earlier, 10x Research predicted a Bitcoin rally thanks to the policies of the Fed.
Before that, former BitMEX CEO Arthur Hayes noted a change in the macroeconomic backdrop and urged buying the first cryptocurrency.