Ethereum spot ETFs were finally approved by the SEC, opening the door for institutional and retail investors to gain exposure to ETH.
The wait is finally over.
After years of regulatory hurdles and amended filings with the SEC, spot Ethereum ETFs were finally approved by the SEC and set to make their debut on US exchanges. This landmark event opens the door for millions of institutional and retail investors to gain exposure to Ethereum (ETH), the second-largest cryptocurrency by market capitalization, through familiar and regulated investment vehicles.
The Chicago Board Options Exchange (CBOE) has confirmed July 23 as the launch date for five spot Ether ETFs: 21Shares Core Ethereum ETF, Fidelity Ethereum Fund, Invesco Galaxy Ethereum ETF, VanEck Ethereum ETF, and Franklin Ethereum ETF. While no official announcements have been made by Nasdaq or the New York Stock Exchange (NYSE) Arca, the remaining four spot ETH ETFs are widely expected to list on these exchanges on the same date.
With the unprecedented launch of the Ethereum Spot ETFs in the U.S., how did ETH react?
Following the wider market sell-off in June, ETH gained an impressive 23% from the lows of July 8, and is currently trading at $3,484. However, ETH is failing to break the $3,500 level and ETH derivatives data remained flat ahead of the launch, suggesting that traders are not anticipating a substantial bullish move on ETH.
Furthermore, ETHBTC, a ratio of Ethereum’s performance against Bitcoin, has fallen back to the 0.05 level, showing that BTC is currently outperforming ETH.
Will the spot ETH ETFs surprise to the upside? Let’s take a look at what you need to know about the launch!
Where Will the Spot Ethereum ETF Be Traded?
The good news is that you won't need to jump through hoops to get your hands on these ETFs. Once listed, shares will be available through virtually any major brokerage platform, including familiar names like Fidelity, E*TRADE, Robinhood, Charles Schwab, and TD Ameritrade. These platforms act as intermediaries, connecting everyday investors with the exchanges where the ETFs are traded.
Key Difference Between the ETFs
With nine spot Ether ETFs slated for launch, you might be wondering how to choose the best fit. The good news is that, fundamentally, these ETFs are very similar. Each is managed by a reputable firm, holds spot ETH with a qualified custodian, and utilizes professional market makers for share creation and redemption. They also offer standard investor protections, including insurance against brokerage failures and cybersecurity threats.
This means the key differentiator for most investors will be the fees. Eight of the nine ETFs have management fees ranging from 0.15% to 0.25%. The outlier is the Grayscale Ethereum Trust (ETHE), an older fund with a different structure that charges a significantly higher 2.5% fee.
To attract investors, many of the new ETFs are offering temporary fee waivers or discounts. Interestingly, the most competitive fee structure comes from Grayscale's newer offering, the Grayscale Ethereum Mini Trust (ETH), with a mere 0.15% fee, waived entirely for the first six months or until it reaches $2 billion in assets under management. Another strong contender is Franklin Templeton's Franklin Ethereum ETF (EZET), boasting the second-lowest fee at 0.19%, entirely waived through January 2025 or until it surpasses $10 billion in assets under management.
Estimated Inflows for the ETFs
Source: https://x.com/asxn_r/status/1814384398277484612/
Research firms and funds have put out estimates for the inflows expected when the ETFs launch, ranging from the least optimistic being JP Morgan’s $3 billion, to the most bullish being Standard Chartered’s $45 billion in the first 12 months.
According to JP Morgan analysts, the “initial market reaction to the launch of spot ethereum ETFs is likely to be negative.” They cited reasons such as Bitcoin’s first mover advantage, the lack of a catalyst like Bitcoin halving, and lack of staking option offering additional yield. The analysts also raised concerns about outflows from the Grayscale Ethereum Trust.
Meanwhile, Standard Chartered has reiterated its bullish March forecast of $15 billion to $45 billion in inflows over the first 12 months of launching, with the ETFs driving ETH’s price to $8,000 by the end of the year.
The Staking Question: Not Yet, But Maybe in the Future
While staking – the process of locking up ETH to support the Ethereum network and earn rewards – is a hot topic in the crypto space, it won't be a feature of these initial spot ETH ETFs.
Several issuers, including Fidelity, BlackRock, and Franklin Templeton, explored the possibility of incorporating staking into their ETFs but were denied by the SEC due to concerns about liquidity. Staked ETH can take days to withdraw from the Beacon Chain, creating a potential conflict with the requirement for ETFs to promptly redeem shares for underlying assets upon request.
Recently, Hester Pierce, one of the few pro-crypto commissioners at the SEC, said that the addition of staking in spot ETFs is “always open for reconsideration.” This gives investors’ optimism that staking could eventually be introduced in the ETFs.
Expert Predictions: Ethereum ETFs' Impact on Price and Capital Flows
Industry experts offer a range of predictions on ETH ETF’s potential impact. Bitwise's Matt Hougan leads the optimistic camp, forecasting ETH prices to reach $5,000 by year-end. He bases this on Ethereum's near-zero inflation rate and the significant amount of ETH locked in staking and DeFi protocols, which could amplify the effect of ETF inflows.
However, JP Morgan's team predicts modest inflows of around $3 billion. They cite Bitcoin's first-mover advantage, referring to the established presence of Bitcoin ETFs and the broader familiarity investors already have with Bitcoin.
Additionally, they point out the lack of staking options in Ethereum ETFs, meaning investors can't earn additional yield from their holdings as they could by directly staking ETH.
Citi Research estimates Ethereum ETF inflows at about a third of their Bitcoin counterparts, translating to $4.7 billion to $5.4 billion over six months. This more conservative projection considers factors such as Ethereum's smaller market cap and potentially lower investor demand compared to Bitcoin.
Bloomberg's James Seyffart and K33 Research align in their expectations, projecting Ethereum ETF demand at approximately 20% of Bitcoin ETF levels. They base this on Ethereum's market capitalization being roughly one-third that of Bitcoin's.
BRN's Valentin Fournier anticipates initial market volatility, predicting a potential dip to $2,800-$3,100 before an eventual recovery towards $4,000. This aligns with the observed surge in ether options implied volatility, which has risen from 57% to 71% in the past 20 days, according to data on CoinMarketCap.
Despite these varied predictions, many analysts remain optimistic about the long-term impact of Ethereum ETFs on the broader crypto market. They see these products as a significant step towards mainstream adoption of Ethereum as an investment asset.
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