Summary:
Staking Concerns: Wintermute attributes a less optimistic forecast for Ethereum ETFs to the absence of a staking mechanism, which could diminish their appeal to yield-seeking investors. Staking has been a core component of Ethereum’s security model since its shift to proof-of-stake in 2022, allowing users to earn rewards by delegating tokens to the network.
Market Sentiment: Crypto market maker Wintermute expects Ethereum ETFs to garner between $3.2 billion and $4 billion in assets within their first year, a stark contrast to the $32 billion expected for Bitcoin ETFs.
Initial Performance: On the first day of trading, Ethereum ETFs recorded an impressive $1.07 billion in shares traded. Grayscale’s Ethereum Trust saw more than $450 million in turnover, followed by the iShares Ethereum Trust and Fidelity Advantage Ether ETF with $245 million and $137 million, respectively.
Ethereum’s journey into the ETF space has officially begun. The U.S. Securities and Exchange Commission (SEC) has approved several Ethereum exchange-traded funds (ETFs), and trading commenced on Tuesday, July 23. This approval comes amid debates on whether Ethereum ETFs will perform as well as Bitcoin ETFs, which launched in January and have since attracted over $17 billion in net inflows.
Market Dynamics:
- Volume and Inflows: Despite the strong debut, Tuesday’s trading volumes fell short of the $4.6 billion traded in Bitcoin ETFs on their January launch. Analysts believe the lack of staking and Bitcoin’s first-mover advantage could impact the performance of Ethereum ETFs.
- Price Movements: Ether (ETH) reversed losses from Monday’s trading session, gaining 0.57% in the past 24 hours and outperforming the broad-based CoinDesk 20 (CD20) index. Crypto investor Alessa Mutto expressed bullish sentiments, predicting significant growth in the coming years.
Analyst Opinions:
- Inflation Concerns: Vivien Wong of HashKey Capital highlighted concerns about Ether’s inflation rate, which saw an increase of approximately 60k ETH over the past month. While the ETH supply has decreased by around 300k ETH since the merge, continued inflation could negate this reduction and turn ETH into an inflationary asset again.
Future Projections:
- Expected Inflows: Citi forecasts Ethereum ETFs to attract $5.4 billion within the first half-year, while Gemini and JPMorgan estimate inflows ranging from $3 billion to $6 billion.
- Market Impact: Analysts are closely monitoring the potential selling pressure from Grayscale’s US$9 billion ETH Trust, which could counteract the positive effects of new inflows.
The launch of Ethereum ETFs marks another milestone for the cryptocurrency industry, pushing digital assets further into the mainstream. However, the success of these funds remains to be seen, as they navigate the challenges of staking mechanisms and market narratives.
Disclaimer
The information provided on 13Desk is for informational purposes only and should not be considered financial advice. We strongly recommend conducting your own research and consulting with a qualified financial advisor before making any investment decisions. Investing in cryptocurrencies carries risks, and you should only invest what you can afford to lose. 13Desk is not responsible for any financial losses incurred from your investment activities.
