Experts respond to the launch of Ethereum ETFs

The launch of spot Ether exchange-traded funds (ETFs) in the US on 23 July 2024 marked a significant milestone. On their first day, Ether ETFs attracted about $106 million in net inflows, with BlackRock iShares Ethereum Trust leading at $266.5 million. However, these figures are modest compared to the nearly $7 billion inflows seen by Bitcoin ETFs in their first three weeks. Analysts predict Ether ETFs may capture only 20-25% of Bitcoin ETF inflows, with some estimates as low as 10%, reflecting market complexities and investor sentiment.

Investor reactions to the ether ETF launch are varied, with many experts expressing cautious optimism. Nathan Gauvin, CEO of Gray Digital, suggests that the launch might not have the transformative impact some anticipated, describing it as ‘less of an event than people are making it seem to be.’

A significant concern among investors is the US Securities and Exchange Commission’s decision to exclude staking from these ETFs. Staking allows Ethereum holders to earn rewards by locking up their ether, enhancing potential returns. The current ETF structure only permits holding unstaked ether, leading some investors to compare this to owning a bond without receiving interest payments. Chanchal Samadder from ETC Group echoed this sentiment, likening holding an unstaked ether ETF to owning a stock without the right to dividends.

Why does this matter?

The exclusion of staking options is a major point of contention within the industry. Many experts, including CoinShares’ Steven McClurg, believe that investors may continue to stake their ether outside the ETF framework to earn yields, potentially diminishing the attractiveness of the ETFs. This situation highlights the challenges of regulatory constraints and the need for a more comprehensive approach to integrating staking into these investment vehicles.