- The spot Ethereum ETF is expected to launch on Tuesday.
- They might only receive 10% to 12.5% of the assets received by the Bitcoin ETF.
The lack of a staking mechanism is a reason investors may not want to spot an Ethereum exchange-traded fund that could launch in the U.S. on Tuesday — potentially opening the floodgates for a new wave of crypto ETFs.
However, not everyone is convinced that an Ethereum ETF will be as popular as the Bitcoin ETF that launched in January.
Crypto market maker Wintermute wrote on Monday that it expects the Ethereum ETF to receive $3.2 billion to $4 billion in assets in its first year.
- The firm expects Bitcoin ETFs to accumulate about $32 billion by the end of the year, which means that Ethereum ETFs will only receive 10% to 12.5% of the total assets that Bitcoin ETFs are expected to receive.
Wintermute said that in this case, the price of Ethereum could rise by 18% to 24%, bringing the price of the second-largest cryptocurrency to $4,200. A new high for 2024, but still below Ethereum's all-time high of $4,800 set in 2021.
“This conservative estimate is impacted by the lack of a staking mechanism, which could reduce Ethereum’s appeal as an ETF investment vehicle,” Wintermute said in the report.
Staking is a process by which Ethereum investors can lock their assets in the network and earn a 3% yield paid in Ethereum.
In its current form, an Ethereum ETF would not allow investors to access that benefit, which could prevent them from seeking out an investment vehicle.
Not only that, ETF holders must also pay management fees - ranging from 0.15% to 2.5%.
- “Even without taking staking into account, paying a 0.2% fee seems impossible to me,” Adam Morgan McCarthy, an analyst at crypto data firm Kaiko Research, told DL News .
Wintermute said the firm would adjust its expectations if the U.S. presidential election leads to a change in leadership at the SEC — which would open the door for an Ethereum ETF to implement staking functionality.
Meanwhile, Bloomberg Intelligence ETF analysts Eric Balchunas and James Seyffart said an Ethereum ETF could capture 15% to 25% of the assets flowing to a Bitcoin ETF.
This expectation - based in part on demand for a Hong Kong Ethereum ETF relative to a Hong Kong Bitcoin ETF - implies a one-year U.S. Ethereum ETF of between $4.8 billion and $8 billion.
