Gary Gensler, chair of the U.S. Securities and Exchange Commission (SEC), recently confirmed that the approval process for spot Ethereum ETFs is proceeding without a hitch. This news comes as the entire community is on the edge of their seats, expecting a launch on July 2nd.
The Ether ETFs got the nod under so-called 19b-4 applications from asset managers who are also big players in the Bitcoin ETF arena. Notable names include Fidelity, BlackRock, Bitwise, and Grayscale, alongside ETF offerings from Franklin Templeton, VanEck, Ark, and Invesco Galaxy.
One important element of these Ether ETFs is their exclusion of staking. This decision aligns with the SEC’s stance on staking-as-a-service offerings, which it views as potential unregistered securities.
ETH in the aftermath of ETF launch
The implications for Ethereum’s price following these ETF launches are mixed. Andrew Kang from Mechanism Capital suggests that Ether could potentially drop to as low as $2,400 post-launch. This projection is based on the historical performance of Bitcoin after its spot ETF got approved.
Kang’s analysis also points out that Ethereum might not experience the same level of institutional buying as Bitcoin. He estimates that Ethereum flows could be around 10% of Bitcoin’s, attributing this to different investor bases for each cryptocurrency.
While Bitcoin appeals more to macro-focused institutional investors, Ethereum is often seen as more of a tech play, attracting venture capitalists, crypto funds, and technologists.
“Access factor adjusts for the flows that ETFs enable that distinctly benefit BTC more than ETH given the different holder bases. For example, BTC is a macro asset with more appeal to institutions with access issues – macro funds, pensions, endowments, SWFs. Whereas ETH is more of a tech asset that appeals to VCs, Crpyto funds, technologists, retail, etc that are not as restricted in accessing crypto.”
Andrew Kang
Kang’s projection places the true net buying flows for Ethereum at about $0.5 billion within the first six months, with reported net flows potentially reaching $1.5 billion.
Despite some skepticism on approval odds from industry observers, Kang believes this mirrors a broader lack of enthusiasm for Ethereum ETFs among TradFi investors.
The venture capitalist outlines a base case scenario where Ethereum’s market capitalization, being roughly a third of Bitcoin’s, coupled with an ‘access factor’ of 0.5, could lead to about $0.84 billion in true net buying and $2.52 billion in reported net flows.
He proposes a more optimistic scenario with $1.5 billion in true net buying and $4.5 billion reported, equating to approximately 30% of the flows seen with Bitcoin ETFs.
Kang expects Ethereum’s price to fluctuate between $3,000 and $3,800 before the ETF launch and potentially dip to between $2,400 and $3,000 afterward. However, a Bitcoin rally could still positively influence Ethereum prices.
Jai Hamid
