The U.S. Securities and Exchange Commission has given the go-ahead to a number of issuers to launch the first exchange-traded funds that invest directly in ether.
After a sudden change of heart in May, the SEC approved the so-called 19b-4 filings from several stock exchanges asking for rule changes that would let them list ether ETFs. This is the last step in a two-step process.
Tuesday is the first day that the ether ETFs will trade. This comes months after the spot bitcoin ETFs went live in January.
A co-founder of the crypto venture capital firm Framework Ventures, Michael Anderson, says that the market has mostly priced in the approval of ether ETFs. Ether
Dow Jones Market Data shows that ETHUSD 1.05% was trading at around $3,484 on Monday night, down 0.7%.
Anderson also said that the flows of the ETFs could have a big effect on the price of ether once they are launched.
Most people agree that ether ETFs will get a lot less money flowing into them than bitcoin ETFs. Spot bitcoin ETFs got $13.8 billion in new money in their first 100 days of trading. Analysts at crypto trading firm Wintermute say that ether ETFs will likely get $4.8 billion to $6.4 billion in new money in the same time period.
Ether’s market cap, which was only $417 billion on Monday, is only a third of bitcoin’s $1.3 trillion market cap. This could be one reason for the difference.
CoinMarketCap data shows that BTCUSD is down 1.5%.
Also, when some wealth managers and advisors put money into crypto when bitcoin ETFs came out in January, “they weren’t assuming that they were going to get an ethereum ETF so quickly after it,” says Tim Rice, CEO of Blockchain Data Provider Coin Metrics.
In a phone interview, Rice said that these investors may have already put all the money they want into crypto. The news will make people less excited about the ether ETF, according to Rice.
Also, these investors probably won’t sell some bitcoin ETFs and buy ether ETFs instead because they would want to avoid the short-term capital-gains tax, which is based on profits from selling an asset held for less than a year, Rice said.
Even so, Eliézer Ndinga, head of strategy and business development at 21Shares, said that bitcoin and ether have “very different use cases.” Ndinga said in a call that investors tend to buy both bitcoin and ether products based on what he saw in demand for crypto exchange-traded products, or ETPs, that the company put out in Europe. Ether ETPs trade on stock markets that follow the price of ether. ETFs are a type of ETP.
Another catch with ether ETFs is that the funds will not stake the ether they invest in. This is because issuers aren’t sure how the regulations will react to staking. When investors stake their crypto, they lock up their coins to protect the Ethereum blockchain and get rewards. The Ethereum Foundation, which supports the blockchain, says that staking ether currently earns a return of 3.2%.
Wintermute analysts wrote in a Monday note that ether ETFs lose a big source of possible returns when they are staked. This makes them less appealing to investors looking for yield.
