How Ethereum ETFs Might Stack Up Versus Bitcoin's

Ethereum ETFs aren't expected to attract as much inflows as Bitcoin ETFs — that could be fine

By: Zack Guzman

June 11, 2024

The recent approval of Ethereum ETFs sent ripples through the crypto world, signaling a new chapter for digital asset investments. Now, it's just a matter of when they will begin trading.

To explore what another anticipated wave of crypto ETFs could mean for the market, Coinage caught up with Bloomberg Intelligence ETF Analyst James Seyffart. Seyffart weighed in on everything from when the ETH ETFs might start trading to how they are expected to perform in terms of attracting inflows compared to their Bitcoin counterparts.

The road to the approval of Ethereum ETFs was fraught with uncertainty. Seyffart recalls the volatile sentiments leading up to the decision. “Last time I was on with you, I thought they were going to get approved,” Seyffart says. “Then, a month later, I switched camps, thinking they wouldn’t happen.”

“All indications were these things aren't going to get approved,” Seyffart notes, reflecting on the cautious outlook that many shared. However, unexpected political developments, including Trump’s pro-crypto stance and Congress's supportive bills, catalyzed a rapid change in the regulatory environment.

Seyffart describes the dramatic pivot vividly. "On Friday, people were convinced it wasn't happening," he recounts. "But by Monday, chatter suggested otherwise. It was unprecedented. We were vocal in thinking it wasn’t going to happen, but the political winds shifted so quickly that it altered the entire landscape."

With Ethereum ETFs now approved, the focus shifts to their market debut and potential impact. Seyffart anticipates that these ETFs could begin trading by early to mid-summer. “If I had to put a date on it, I'd say early July, but it could stretch to August or September,” he said. The approval process, which includes both the SEC's Division of Trading and Markets and the Division of Corporate Finance, typically involves meticulous review stages that can extend the timeline. As of Monday, comments on S-1s filings still hadn't hit.

The timeline for trading isn't the only point of interest. There's also considerable speculation about how much these Ethereum ETFs will attract in inflows, especially compared to Bitcoin ETFs. Seyffart is cautiously optimistic but realistic about their potential. “We saw Bitcoin ETFs attract massive inflows, about $15.6 billion since they launched in January. For Ethereum ETFs, even capturing 20-25% of that would be a significant success,” he explains.

Almost the entirety of weekly crypto asset flows were once again due to Bitcoin ETFs. (Source: CoinShares)
Almost the entirety of weekly crypto asset flows were once again due to Bitcoin ETFs. (Source: CoinShares)

Seyffart highlights the distinct market dynamics that could influence the performance of Ethereum ETFs. "The Bitcoin ETFs set records with their rapid inflow, but expecting the same for Ethereum might be unrealistic," he notes. “Even so, if Ethereum ETFs capture a fraction of what Bitcoin ETFs did, it would still be one of the most successful ETF launches in history.”

Another critical aspect is how investors allocate their portfolios between Bitcoin and Ethereum. “If you've already allocated a portion of your portfolio to Bitcoin ETFs, you might not want to sell off those holdings to buy Ethereum, especially considering tax implications,” Seyffart explains. “I think many will add to their existing holdings rather than reshuffle their portfolios entirely.”

Seyffart also points out the potential for new allocations. “Advisors and investors who were previously restricted now have the opportunity to diversify into Ethereum. We might see new money flowing into these ETFs, rather than just shifting from Bitcoin to Ethereum.”

Looking ahead, the launch of Ethereum ETFs represents a significant milestone. It opens new avenues for investors and sets a precedent for future crypto asset ETFs. That said, it's unlikely to see new ETFs beyond Bitcoin or Ethereum issued anytime soon. Those two are the only cryptocurrencies that boast robust enough futures markets in the U.S., and now, also approval as commodities in the eyes of regulators.

"I don't want to say it's not going to happen, but I do think we're probably decently far away," he said about the prospect of new crypto ETFs. "Even if you filed for a Solana ETF today, you got to wait 240, 260-ish days before you can even get a 19b-4 approval order under the current processes."

As the Ethereum ETFs prepare to enter the market, their success will be closely watched. The comparison with Bitcoin ETFs offers a fascinating glimpse into how different digital assets might be received by the larger market.

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