Muted Expectations for Ethereum ETFs Amid Market Insights

Several leading cryptocurrency firms are projecting a tepid launch for exchange-traded funds (ETFs) that focus on Ethereum’s native asset, ether (ETH). According to Wintermute, a significant player in market making, the anticipated inflows for ether ETFs are capped at around $4 billion over the next year. This figure falls short of the broader analyst consensus, which estimates inflows could range between $4.5 billion and $6.5 billion. Notably, even this upper estimate is significantly lower—by approximately 62%—than the $17 billion amassed by Bitcoin ETFs since their introduction in the U.S. market just six months ago.

Despite the relatively low inflow projections, Wintermute believes that ether’s price could appreciate by as much as 24% in the coming year, driven primarily by these projected inflows. Currently, eight potential issuers are poised to launch their products in the U.S. as early as Tuesday. This list includes major financial institutions such as BlackRock, Fidelity, Grayscale, VanEck, Franklin Templeton, Bitwise, 21Shares, and Invesco, which all submitted their final documents last week.

However, a notable setback for the industry came when U.S. regulators declined requests from issuers to permit ether ETFs to stake the cryptocurrency they hold. Such staking could have generated additional income that could be shared with investors. Wintermute commented, “This loss reduces the competitiveness of ETH ETFs compared to direct holdings, where investors can still benefit from staking.”

Research firm Kaiko echoes similar sentiments, referencing past experiences with Ethereum-focused launches. Will Cai, the head of indices at Kaiko, mentioned, “The launch of the futures-based ETH ETFs in the U.S. late last year was met with underwhelming demand.” He emphasized that all eyes are now on the launch of spot ETFs, with many hoping for rapid asset accumulation.

Moreover, Cai indicated that, irrespective of the long-term outlook for ether, its price is likely to be highly sensitive to the inflow numbers during the initial trading days. Recent data from Kaiko has shown a sharp increase in ether’s implied volatility over the weekend, with contracts set to expire soon (on July 26) surging from 59% to 67%. This increase suggests a lack of conviction regarding the ETH launch, as traders are willing to pay higher premiums to hedge their bets.

In addition, issuers have disclosed their anticipated management fees in their recent filings, which is one of the final steps toward obtaining regulatory approval. Grayscale’s Ethereum Trust has proposed a management fee of 2.5%, while most other managers are keeping their fees in a more competitive range of 0.15% to 0.25%.