Ether (ETH) has climbed above $3,500 ahead of the imminent launch of U.S.-based spot ETFs. Despite Ethereum’s greater utility compared to Bitcoin, including features like liquid staking, questions remain about whether ETH ETFs will perform as well as their Bitcoin counterparts.
Market Dynamics and Grayscale’s Impact
As Ether surged past $3,500 in anticipation of the new ETFs, market participants are cautiously optimistic yet wary of potential downward pressures. One significant concern is Grayscale’s $9 billion ETH Trust, which could introduce selling pressure that might counterbalance the positive effects of new inflows. Vivien Wong, partner at HashKey Capital’s Liquid Funds, highlighted this potential risk.
HashKey, instrumental in launching one of the Ether ETFs in Hong Kong, predicts a $3 billion inflow in the first six months of U.S. trading. This estimate considers Bitcoin’s market cap being 30% of Ether’s and the absence of staking.
Inflation and Supply Concerns
Another issue is Ether’s inflation rate, which affects token supply in the open market. Over the past month, ETH supply increased by about 60,000 ETH, contrary to expectations. Wong noted that while the ETH supply has decreased by approximately 300,000 ETH since the merge, continued inflation at this rate could negate this reduction within six months, potentially making ETH an inflationary asset again.
ETF Approval and Initial Market Performance
ETH reversed Monday’s losses, gaining 0.57% in the past 24 hours, according to CoinGecko data. Eight issuers, including BlackRock, received approval from the U.S. Securities and Exchange Commission for their latest S-1 filings, setting the stage for the ETFs to begin trading.
Market analysts are debating whether ETH ETFs will mirror the performance of Bitcoin ETFs, which were launched in January and have since attracted over $17 billion in net inflows. Danny Chong, co-founder of Tranchess, believes that Ethereum’s greater utility, such as liquid staking, gives ETH ETFs an edge. Despite initial slow performance in Hong Kong, he is optimistic that a larger investor base will enhance liquidity and performance.
Inflow Projections and Industry Expectations
Citi projected around $5.4 billion in inflows within the first half-year, attributing potential underperformance to the lack of staking and Bitcoin’s first-mover advantage. Gemini and JPMorgan offered varied estimates, with inflows ranging from $3 billion to $6 billion if staking were included.
As the market prepares for the launch of ETH ETFs, balancing optimism with caution will be crucial. The interplay between new inflows and potential selling pressures will determine the short-term trajectory of Ethereum’s market performance.
