Since the US SEC approved spot Ether exchange-traded funds (ETFs) on May 23, 2024, more than $3 billion worth of Ethereum has been withdrawn from centralized crypto exchanges (CEX). On-chain data shows that ETH ETFs have the opposite market response to BTC ETFs.
Also Read: ARK Invest Backs Out of Spot Ethereum ETF With 21Shares
Crypto market analysts caution that spot Ether exchange-traded funds might not experience the same initial influx as spot Bitcoin ETFs. This is due to the more complex nature of valuing Ether’s use cases.
Ethereum ETFs Fail to Meet Trader’s Expectations
According to data from CryptoQuant, the amount of Ether on exchanges decreased significantly between May 23 and June 2, amounting to approximately $3.02 billion.
When exchange reserves decrease, fewer coins are available for sale. This happens when investors decide to hold onto their coins for reasons other than selling them right away.
According to data from Glassnode, the percentage of circulating Ether supply held on exchanges is currently at a remarkably low level of 10.6%, as revealed by BTC-ECHO analyst Leon Waidmann.
Leon states, “Exchange balances for both #Bitcoin and #Ethereum are at their lowest levels in years […] Whales continue to accumulate[…] #BTC on exchanges is down to 11.6%, and #ETH is at 10.6%!”
ETH ETFs Will Not Live up to Bitcoin ETFs
Experts predict that when spot Ether ETFs become available for trading, Ether may surpass its November 2021 all-time high of $4,870. This surge in demand resembles the impact Bitcoin experienced after the launch of spot Bitcoin ETFs in January.
Unfortunately, that is not the current scenario. Currently, the value of Ethereum stands at $3,811.94, reflecting a slight decrease of 0.5% within the last hour and an uptick of 0.3% compared to yesterday. The current value of ETH has decreased by 2.2% in the last seven days.
On Jan. 11, the first day of trading, the spot Bitcoin ETFs saw an outstanding $655.2 million in inflows, surpassing industry expectations.
Bitwise’s BITB product experienced significant inflows on the day Bitcoin ETFs were launched, with a total of $237.9 million. This was closely followed by Fidelity’s FBTC with $227 million and BlackRock’s IBIT with $111.7 million, according to data from BitMEX Research.
How can ETH ETFs live up to BTC ETFs? VanEck, a reputable player in the crypto market, has put forward an interesting proposition. They propose that by analyzing transaction volume, the number of users, and validators, they can gain valuable insights into the adoption and use of Ethereum.
ETH ETFs Could Be a Crypto-Adoption Gamechanger
With the introduction of spot Ethereum ETFs, more investors are exposed to smart contracts and decentralized applications (dApps). This, in turn, increases awareness about the transformative power of public blockchains in digital commerce.
According to international precedent, the Grayscale Research team predicts that the demand for U.S. spot Ethereum ETFs will be around 25%- 30% of the demand for spot Bitcoin ETFs. It is unlikely that the ETFs will have access to a significant portion of the Ethereum supply, such as staked ETH.
Hong Kong recently approved the first spot Bitcoin and Ether ETFs in a noteworthy development, marking a significant milestone in the crypto market. This strategic move reflects the current global trends. It establishes Hong Kong as a prominent center for crypto investment, much like the U.S. and Canada, where similar financial products have already been introduced.
Cryptopolitan Reporting by Florence Muchai
