Ether (ETH) Surges Ahead of Spot ETFs Launch Amid Market Speculation

Ether (ETH) Surges Ahead of Spot ETFs Launch

Ether (ETH) has seen a notable increase, breaching the $3,500 mark as anticipation builds for the launch of spot exchange-traded funds (ETFs) set to commence trading on Tuesday. While this event has sparked optimism, some analysts suggest that initial inflows may be muted during the first few weeks.

Vivien Wong, a partner at HashKey Capital’s Liquid Funds, highlighted the growing concern surrounding Grayscale’s substantial US$9 billion ETH Trust. In an email to CoinDesk, she noted, “Market participants are closely monitoring this situation, as there are apprehensions that Grayscale’s potential selling pressure could counteract the positive impacts of new inflows, thereby exerting downward pressure on the market.” HashKey was instrumental in launching one of the Ether ETFs in Hong Kong and projects that inflows could reach around $3 billion within the first six months of trading in the U.S. This estimate is based on the observation that Bitcoin’s market capitalization represents about 30% of Ether’s, coupled with the current absence of staking options.

Another point of concern is Ether’s inflation rate, which influences the token supply available in the market. Wong pointed out, “Over the past month, the ETH supply has increased by approximately 60,000 ETH, which runs contrary to market expectations.” While the ETH supply has seen a reduction of about 300,000 ETH since the merge, ongoing inflation at the current rate could negate this decrease within six months, potentially transforming ETH back into an inflationary asset.

In a recent analysis of market performance, ETH rebounded from losses incurred during Monday’s trading, recording a 0.57% gain over the past 24 hours, according to data from CoinGecko. This performance outpaced the broader CoinDesk 20 (CD20) index, which experienced a decline of 1.7%.

On Monday, eight issuers, including BlackRock, received crucial approval from the U.S. Securities and Exchange Commission for their latest S-1 filings. This move has prompted market observers to speculate whether the performance of these ETFs will mirror that of their Bitcoin counterparts, which launched in January and have attracted over $17 billion in net inflows.

“The pivotal question remains: will ETH ETFs outperform Bitcoin ETFs?” queried Danny Chong, co-founder of Tranchess, in an email to CoinDesk. He elaborated, “Technically, Ethereum offers more utility than Bitcoin, given features like liquid staking.” He also noted, “However, ETH ETFs were initially slow to meet industry expectations following their launch in Hong Kong.”

Chong expressed optimism regarding the future of ETH ETFs, stating, “With a larger investor base, I believe ETH ETFs will perform better and contribute to the liquidity we require.” In a report earlier this month, Citi projected approximately $5.4 billion in inflows during the first half-year, attributing this underwhelming expectation to the absence of staking and Bitcoin’s established first-mover advantage. Meanwhile, Gemini estimates the inflow could reach $5 billion, while JPMorgan predicts inflows could be “as much as $3 billion,” potentially soaring to $6 billion if staking were permitted.