With the SEC's final authorization for spot Ethereum ETFs now official, ETF trading will begin on Tuesday morning. There is a buzz about the potential recall of these new products. However, the initial request from VNRs is expected to be muted.
“We think if the Ethereum product gets somewhere in the 20% range of where the Bitcoin products are, that would be a good result,” said Aniket Ullal, vice president of ETF data and analytics with research firm CFRA.
Ethereum is a cryptocurrency with a current market cap of around $416 billion, second only to Bitcoin, with a market cap of $1.32 trillion. The SEC provisionally approved eight Ethereum ETFs in May. The SEC asked issuers to amend their S-1 filings before giving the final green light this afternoon.
On Friday, the Chicago Board Options Exchange (CBOE) posted notices that some Ethereum ETFs will begin trading on Tuesday, pending final SEC approval, which has now been received. The five funds listed by CBOE include Fidelity Ethereum Fund (FETH), VanEck Ethereum ETF (ETHV), Franklin Ethereum ETF (EZET), Invesco Galaxy Ethereum ETF (QETH) AND 21 Share ETF Core Ethereum (CETH). Fees for these will range from 0.20% to 0.25%, with most issuers planning to waive the fees for six months to a year, depending on the investment amount.
Additionally, Grayscale Ethereum Trust, a foundation of the future Ethereum ETF (ETHE), would be converted into a spot product at a fee of 2.5%. (Grey scale presented separately for Grayscale Ethereum Mini Trust (ETH)with an expense ratio of 0.15%.) NYSE Arca, meanwhile, has approved both FEVER and Bitwise Ethereum ETF (ETHW), with trading also starting tomorrow. In the meantime, iShares Ethereum Trust ETF (ETHA) is approved by NASDAQ.
While market watchers expect to see some demand for Ethereum spot ETFs from RIAs, it is likely to reduce the industry's appetite so far for Bitcoin spot ETFs. According to Ullali, there are at least two reasons for this. The first is that Bitcoin products tend to be a more popular choice among investors. Ullal noted that Bitcoin currently represents approximately 53% of the total crypto market, while Ethereum represents only 18%.
Additionally, adoption of spot Bitcoin ETFs has skewed heavily toward individual investors and very small RIAs. CFRA has no way of estimating the exact split of Bitcoin ETF investment between RIAs and self-employed individuals, but a May analysis of 13F forms filed by asset managers with at least $100 million in AUM found that they own approximately 15% to 20%. of total shares of Bitcoin ETFs outstanding. “We know it's very much a retail demand, just based on our conversations with investors and looking at 13Fs,” Ullal said.
Similarly, Ric Edelman, founder of the Digital Asset Council of Financial Professionals, predicts that in the first year after their launch, Ethereum ETFs will likely accumulate a third of the assets that ETFs currently hold of Bitcoin. He noted that it would take time for RIAs to become comfortable with the product and for spot Ethereum ETFs to become available on wealth management platforms.
“Initially there will be less demand,” Edelman said. “Over the next year, we expect tens of billions of dollars to flow into these ETFs, but it won't be immediate. I expect Ethereum ETFs to have a third of the assets that Bitcoin ETFs have and that reflects the current market cap. As advisors gain more knowledge about the differences between Bitcoin and Ethereum, enthusiasm for Ethereum will grow.”
Chris King, CEO of Eaglebrook Advisors, a crypto investment platform for RIAs that offers Ethereum and Bitcoin SMAs, agreed with this assessment. He said most RIAs cannot currently recommend Bitcoin ETFs, as there are still wealth management platforms that have not adopted them. As a result, initial buying into Ethereum ETFs is likely to come from self-directed retail investors and institutions.
“I think most of the initial flows, similar to Bitcoin ETFs, will not come from the wealth management channel or the advisor channel,” King said. “In the short and medium term, it is not that the demand will be low; is that there will still be some friction to get in.”
However, King said that within about eight to 12 months, most of the flows into Bitcoin and Ethereum spot ETFs could start coming from the wealth channel. During that time, interest rates may fall, more wealth management platforms are likely to adopt these ETFs, and a bullish momentum in prices is expected if current trends continue.
“I think there will be an increased demand for risk assets, and crypto has typically been the fastest horse in the risk asset race, as it was in 2020 and 2021,” King said.
Randy M. Long, a registered financial advisor at Long Family Office, based in Reedley, California, noted that his firm already has a positive outlook for Ethereum ETFs in the country.
“We strongly support these,” he wrote in an email. “We have invested our portfolios in GBTC and ETHE for several years now, slightly more than any other firm I have been aware of.”
According to independent research and consulting firm ETFGI, at the end of June, global listed crypto ETFs and ETPs reported year-to-date inflows of $45.6 billion, the highest level on record, and up from approximately 566.6 million dollars during the same period of the year. forward. The jump in inflows reflected the SEC's approval of spot Bitcoin ETFs. At mid-year, there were 68 Bitcoin ETFs/ETPs globally, with total assets of $65.97 billion and net new assets of $45.0 million year-to-date. There were 41 Ethereum ETFs/ETPs, with net new assets of $4.1 billion and net new assets of $116 million.