Ether ETFs: Potential $1 Billion Monthly Inflows Expected

Ether ETFs Expected to Bring in $1 Billion Monthly Inflows

Ether (ETH) spot exchange-traded funds (ETFs) could potentially attract $1 billion in net inflows each month once they are approved for trading, as per a report by Galaxy Research. Analyst Charles Yu predicts that the net inflows into ETH ETFs could be between 20-50% of those into BTC ETFs over the initial five months, with a target of 30%.

Approval and Potential Impact

Ether ETFs are on the brink of becoming available for trading in the U.S. following the recent approval of filings by the Securities and Exchange Commission (SEC). The SEC’s clearance of their S-1 filings is the next step before these products can start trading. Notably, spot bitcoin ETFs were launched in the U.S. in January.

Expected Demand and Price Sensitivity

It is anticipated that demand for the new ether ETFs will come from independent investment advisors or broker/dealer platforms, similar to the pattern observed with bitcoin ETFs. Ether is expected to be more price-sensitive to ETF inflows compared to bitcoin due to factors such as the amount of ETH locked in staking, bridges, and smart contracts, as well as the lower amount held on centralized exchanges.

Challenges and Considerations

• Galaxy Research warns that spot ether ETF demand might be limited due to the absence of staking rewards.
• Outflows from the Grayscale Ethereum Trust (ETHE) could pose a challenge, with an estimated negative flow of about 319,000 ETH per month or $1.1 billion.
• Despite potential challenges, the report suggests that the impact of ETHE ETF conversion on ETH price will be less significant compared to GBTC conversion for bitcoin.

SEC Approval Timeline

There are speculations that the SEC could greenlight spot ether ETFs as early as July 4, according to a recent Reuters report.