Ethereum ETFs Brace For Sluggish Reception, JPMorgan Expects Modest $1-$3 Billion Inflows

According to a Bloomberg report, analysts suggest that the debut of the recently approved Ethereum ETFs in the US may generate significantly less demand than spot-Bitcoin products. Major financial institutions, including BlackRock and Fidelity, await final approvals from the Securities and Exchange Commission (SEC) to list the long-awaited Ethereum funds. 

However, JPMorgan strategists anticipate much smaller net inflows into Ethereum ETFs than the $15.3 billion flowing into Bitcoin vehicles this year.

Analysts Divided On Ethereum ETFs’ Potential

Per the report, the success of the five-month-old Bitcoin ETFs can be attributed to a controversial narrative that presents Bitcoin as digital gold, a concept that Ether lacks. Additionally, the Ether funds will not offer staking rewards for blockchain maintenance, a feature available to those who hold the token directly.

Caroline Bowler, CEO of BTC Markets Pty, highlights that ETH lacks the same profile as Bitcoin. Bitcoin’s market value of $1.4 trillion is three times larger than Ether’s. This discrepancy indicates that the Ethereum ETFs in the US may not have a comparable impact.

In a surprising shift, the SEC recently signaled its willingness to approve spot Ethereum ETFs, following its earlier acceptance of Bitcoin funds due to a court reversal in 2023. While this development boosted Ether’s price, its 109% gains over the past year still lag behind Bitcoin’s 169% surge, including its record high in March.

JPMorgan strategists led by Nikolaos Panigirtzoglou estimate that prospective Ether portfolios will attract a “modest” $1 billion to $3 billion in net inflows for the remainder of the year. 

However, as Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, reports, these products may struggle to capture 20% of the current $62.5 billion Bitcoin ETF assets in the US.

Despite these reservations, Vetle Lunde, a senior research analyst at crypto specialist K33 Research, remains optimistic, predicting $4 billion worth of net inflows in the first five months for the Ethereum ETFs and a significant “supply absorption shock” that could boost ETH’s price.

VanEck Bullish On Ethereum

Fund manager VanEck, which aims to launch an Ethereum ETF, sees potential in the popularity of the Ethereum blockchain underlying the token, particularly for applications in crypto financial services. 

Matthew Sigel, VanEck’s Head of Digital-Asset Research, believes that investors will eventually recognize the greater potential for application and innovation within the Ethereum ecosystem than Bitcoin.

It is worth noting that the launch of nine new US ETFs for Bitcoin on January 11 initially caused a decline in Bitcoin’s price, coupled with outflows from the Grayscale Bitcoin Trust. However, the strength of demand for the new ETFs eventually overshadowed these concerns, and Bitcoin resumed its upward trajectory.

Similarly, asset manager Grayscale plans to convert its $11 billion Ethereum offering into an ETF, similar to its Bitcoin fund. While redemptions from the Grayscale fund may create selling pressure on ETH, the overall market impact remains unclear.

As of the time of writing, ETH was trading at $3,830, while Bitcoin continues to approach its record levels of $73,7000 reached in March. Ether is still some distance away from its all-time peak of $4,866, achieved during the 2021 bull run. 

Featured image from DALL-E, chart from TradingView.com