Ethereum ETF is finally here

More than half a year after the launch of Bitcoin ETF, the Ethereum spot ETF that people in the "currency circle" have been looking forward to will finally be listed in the United States.

According to reports, the U.S. Securities and Exchange Commission has notified eight companies that have applied to launch the first ETFs linked to the price of Ethereum that their products will begin trading on Tuesday. This means that U.S. regulators have finally approved the Ethereum spot ETF, enabling Americans to trade Ethereum through ETF tools.

1. Ethereum ETF is finally approved

It is reported that the first batch of ETFs that directly invest in Ethereum include: 21Shares, Bitwise Asset Management, BlackRock, Franklin Templeton, Fidelity Investments, VanEck and Invesco.

Currently, the Ethereum ETF products of these eight companies will begin trading on three different exchanges on Tuesday morning, Eastern Time. The Chicago Board Options Exchange, Nasdaq and the New York Stock Exchange have all confirmed that they are ready to start trading Ethereum ETFs.

The SEC has been reviewing and considering whether to approve an Ethereum ETF for the past few years. However, in January this year, the regulator approved the Bitcoin ETF, attracting tens of billions of dollars in capital inflows to the Bitcoin market. This event has lit a bright light on the road to approval of the Ethereum ETF.

Just a few weeks ago, the approval seemed uncertain. But in late May, after a long period of silence, SEC officials suddenly began to contact potential ETF issuers. Then, on May 23, the regulator approved a key document, paving the way for the Ethereum ETF to be fully approved.

"We have now fully entered the ETF era of cryptocurrencies," said Matt Hougan, chief investment office of Bitwise. "Investors can now access more than 70% of the liquid crypto asset market through low-cost ETFs."

Kyle DaCruz, head of digital assets at VanEck, said, "As the first company to apply for an Ethereum ETF as early as 2021, we have always believed that investors should be exposed to Ethereum through a tool they find convenient and familiar."

2. A large amount of funds will pour in

The approval of the Ethereum ETF will obviously bring a large amount of new funds to the Ethereum market.

In January of this year, the spot Bitcoin ETF was approved and began trading. In terms of the speed of capital influx, this was the most successful in the history of ETF products: tens of billions of dollars of funds flowed in just two months, pushing the price of the largest cryptocurrency to a record high.

Some analysts predict that although the inflow of funds into the spot Ethereum ETF may not be as high as that of the Bitcoin ETF, it may still push the price of Ethereum to $6,500. As of press time, the spot price of Ethereum is around $3,443, which means that the Ethereum ETF is expected to nearly double the spot price.

Research firm Steno Research predicts that the newly launched ETF may have inflows of $15 billion to $20 billion in the first year, which is roughly the same as the inflow scale of spot Bitcoin in the first seven months after its launch.

Important information in the cryptocurrency circle within 24 hours

1. Kakao founder Kim has been arrested;

2. Bitwise spot Ethereum ETF webpage is now online;

3. US spot Ethereum ETF is officially approved for listing and trading;

4. The US government address transferred 58.7 BTC to the address starting with 34tXjQ;

5. 21Shares submitted S-1 documents for its spot Solana ETF in the United States;

6. BlackRock spot Ethereum ETF is expected to start trading tonight Beijing time;

7. NPC Labs completed $18 million seed round financing, led by Pantera Capital;

8. 21Shares: Its Ethereum pledge ETP AETH asset management scale exceeds $510 million;

9. NYSE ARCA approved the listing and registration of Bitwise spot Ethereum ETF beneficiary common stock.

In addition, there have been rumors in the market recently that BlackRock may also be preparing to apply for SOL ETF.

If Solana's spot ETF is approved, it will have a greater impact on the crypto industry, because Solana was once officially recognized as a "security", and it is said that the SEC still insists that this recognition will not change.

On June 5, 2023, the SEC listed SOL as a security in the lawsuit against Binance. In the case with Coinbase on June 6 of the same year, SOL was also listed as a security. The SEC's accusations against Binance and Coinbase were also unregistered for securities business.

In June of this year, the SEC still insisted in its accusations with Kraken that 11 tokens such as SOL, ADA and ALGO were securities, reflecting the consistency of supervision.

But from the perspective of those of us in the crypto industry, this recognition is very strange. You must know that Solana is known as the "Ethereum" killer, and it has started a comprehensive competition with the Ethereum ecosystem in this cycle.

Ethereum ETF is likely to fail to reproduce the glory of Bitcoin ETF

Can Ethereum spot ETF reproduce the glory of Bitcoin spot ETF? Although the crypto market is very much looking forward to such a result, in reality, it is unlikely.

A new survey by State Street Global Advisors shows that in April this year, 45% of US individual investors used ETFs, among which Bitcoin spot ETFs have accumulated more than $54 billion in assets under management since their launch in January this year. The total holdings of US spot Bitcoin ETFs have exceeded 900,000 Bitcoins, reaching 908,000 Bitcoins at the time of writing, accounting for 4.6% of the current Bitcoin supply, and the total value of on-chain holdings reached approximately $61.2 billion. In addition, data shows that the capital inflow of US spot Bitcoin ETFs reached approximately $1.08 billion last week, and the total capital inflow since its launch reached $17.3 billion, accounting for 89.5% of the global market.

Behind such a brilliant achievement, it also reveals the preference of American investors for investing in Bitcoin. On this basis, there is currently no ETF on the market that can compete with the inflow of Bitcoin ETFs.

Ethereum's beacon chain staking alone accounts for 27.57% of Ethereum's supply, which is completely unparalleled in the Bitcoin ecosystem. Then there are the problems of DeFi, L2 bridge and various contracts. There is more than one-third of the supply of Ethereum, and the generation mechanism of Ethereum is different from Bitcoin's POW. The value they represent in the traditional trading market is incomparable.

The reason why Americans love Bitcoin so much is that, on the one hand, the financial value of Bitcoin, known as digital gold, is the highest in the Crypto market. On the other hand, Wall Street giants including JPMorgan Chase, Goldman Sachs, and Citigroup have begun to provide Bitcoin investment services to customers and directly purchase Bitcoin as part of asset allocation. Bitcoin is relatively easy to manipulate. JPMorgan Chase, Bank of America, etc. have begun to provide banking services to cryptocurrency companies, while payment giants such as PayPal, Visa, and Mastercard allow users to buy, sell or use Bitcoin on their platforms.

An interesting point is that, unlike the consensus in Crypto, Solana is a more popular currency in the US financial market. If you look closely at this round of bull market, Solana is also the mainstream token with the strongest increase. In other words, Ethereum is not the "star" that is too popular in the US market.

From $55 in November last year, to $100 in January this year, and now approaching the $180 mark, SOL has increased by as much as 619% in the past year. Even after the Bitcoin ETF was listed, we compared the mainstream currencies. Bitcoin has increased by 51.65% in the past six months, Ethereum has increased by 49.80%, and SOL has increased by 62.73%.

Ethereum spot ETF has great potential, but market sentiment is not high

There are many opinions in the market about how much net inflow funds Ethereum spot ETF can obtain. Standard Chartered Bank, a traditional financial institution in the United States, has given the highest valuation of $2 billion per month, while JPMorgan Chase is more pessimistic and gives a lower valuation of $500 million per month.

Bitwise and Grayscale executives, as issuers, also made predictions on the X platform. Matt Hougan, chief technology officer of Bitwise, predicted on the X platform that it will obtain $15 billion in net capital flow in the first 18 months of listing. Grayscale's research team expects demand for U.S. spot Ethereum ETFs to reach 25%-30% of spot Bitcoin ETF demand. A large portion of Ethereum supply (such as staked ETH) may not be used for ETFs.

Galaxy also set a net inflow forecast target of 30% for the first five months.

Research firm Steno Research also predicts that Ethereum spot ETFs could attract $15 billion to $20 billion in inflows in their first year, which is roughly the same as the inflows of Bitcoin spot ETFs in just seven months.

However, unlike the optimistic forecasts of many institutions, the market's current reaction to the prospects of Ethereum inflows is relatively flat. Data from research firm Kaiko shows that investors lack confidence in the launch of Ethereum spot ETFs. As of press time, the spot price of Ethereum is $3,530.04, with a 24-hour increase of only 1.21%.

Citigroup predicts that ETF inflows can only account for 30%-35% of Bitcoin inflows, or even lower, and is not optimistic about the advantages that ETFs bring to the Ethereum market price. CoinDesk cited the report as saying that in the next six months, this figure will reach US$4.7 billion to US$5.4 billion.

Compared with the first-mover advantage and status of Bitcoin ETF in the hearts of the people, many functions of the Ethereum ecosystem cannot be achieved through ETFs, so the demand is not strong.

For example, Ethereum's unique staking function, a large number of tokens in Ethereum exist in the validator nodes on the beacon chain, and its significantly high returns are the key killer for Ethereum to gain the evergreen status in the market after the transformation mode. When submitting the ETF application this year, the staking function was rejected by the SEC. In the lawsuit against Coinbase and Kraken, the SEC specifically accused the staking of being an unregistered security, which violated the US Securities Act.

Therefore, at least in the short term, we will not see the staking function in ETFs.

And the worst thing we can see from this result is that the approval of ETF is more about facilitating the financial needs of the market for ETF, while for the Ethereum ecosystem, in addition to financial value, it does not seem to play a good role in building the ecosystem.

Judging from the approval of the Ethereum spot ETF, at least the SEC believes that POS and pledge mechanisms are not obstacles to Ethereum transactions. (The core view of the SEC has always been to suppress securities products.) At least before the tokens based on the Ethereum ERC-20 protocol apply for ETFs, the SEC believes that the impact on the US trading market is not serious.

Another factor affecting market liquidity is that, on the one hand, under the expectation of the launch of ETFs, the number of ETH held by exchanges has fallen to a multi-year low. This year, market liquidity is more inclined to the Bitcoin market, resulting in insufficient inherent liquidity in the Ethereum market this year.

On the other hand, since Grayscale converted ETHE into an ETF, the market was impressed by the selling pressure that lasted for more than a month after GBTC was converted to a Bitcoin spot ETF. Everyone has the same concerns about the potential selling pressure after ETHE is listed.

There is also a potential problem. The Ethereum spot ETF was approved in May and went online today. The pause in the middle was too long, and the market sentiment has been digested. Therefore, in addition to the influence of real money and silver, the emotional driving force is insufficient, and for Ethereum, this consensus value is more important.

But in any case, for investors, the spot ETH ETF provides access to differentiated crypto assets with unique return characteristics. The Ethereum ecosystem is both strong, with more than 15 million active addresses per month, and rapidly expanding, with smart contracts deployed in 2023 increasing by 300%. By increasing the use of Ethereum, spot ETH ETF investors will help increase the utility of Ethereum and contribute to the development of the overall crypto ecosystem.

Since its birth in 2009, Bitcoin has quickly emerged with its decentralized, transparent and tamper-proof characteristics, and is known as "digital gold". The total amount of Bitcoin is constant at 21 million, and this scarcity is very similar to gold, making its position in safe-haven assets increasingly important. As central banks around the world over-issue money and inflationary pressures intensify, more and more investors are turning their attention to Bitcoin in an effort to find new ways to preserve their assets.

The news that the government holds 200,000 Bitcoins is undoubtedly a symbol that Bitcoin has become an important part of global asset allocation. Bitcoin is not only a speculative tool, but also a means of storing value with great potential. The announcement of this news has greatly increased the market's confidence in Bitcoin and has caused its price to rise rapidly.

The government's intention to hold Bitcoin on a large scale is worth pondering. From a macroeconomic perspective, Bitcoin's decentralized nature makes it an effective means of hedging the risks of the traditional monetary system. When the global economy faces uncertainty and inflationary pressures rise, Bitcoin's independence and anti-censorship make it an extremely attractive asset.

The government's holding of 200,000 Bitcoins may not only be for hedging risks, but also a forward-looking strategy for the future digital economy layout. With the development of blockchain technology, Bitcoin and other cryptocurrencies have gradually penetrated into all walks of life. By holding Bitcoin, the government can take the initiative in the future wave of digital economy and promote the digital transformation of its own economy.