Ethereum spot ETFs are set to launch in the US on Tuesday, July 23, with forecasts indicating potential monthly inflows of $1.2 billion. climate forecast It comes from ASXN, a research company specializing in crypto finance analysis.
US Ethereum ETFs Could Surprise Everyone
At the heart of the ASXN analysis is the comparison between the newly launched Ethereum ETFs and the previously launched Bitcoin ETFs. One important differentiating factor highlighted in the report is the fee structure. While the Ethereum ETFs mirror the fee approach of Bitcoin ETFs, they offer a notable competitive edge with Grayscale’s new Ethereum “mini trust” product. Initially unveiled with a 0.25% management fee, the fee was quickly adjusted to 0.15% following competitive pressure from other lower-fee products such as Blackrock’s ETHA ETF.
Grayscale has strategically repositioned 10% of its Ethereum Trust (ETHE) assets under management (AUM) into this small fund, offering ETHE holders an exchange-traded fund without any tax liability — a move aimed at retaining capital within its ecosystem and providing a more attractive fee structure for fee-sensitive investors.
“Grayscale’s strategic revision of its fee structure and innovative small-cap offering is likely to redefine the competitive landscape for Ethereum ETFs,” an ASXN analyst commented in the report. “This could not only stem potential outflows, but also attract a broader institutional investor base due to more favorable fee dynamics.”
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The ASXN report also covers the potential market impact of funds flowing into Ethereum ETFs. Using global data from existing crypto ETFs, the research draws out similarities and contrasts between the Ethereum and Bitcoin markets. Historically, ETFs have outperformed Bitcoin compared to Ethereum based on asset under management to market cap ratios. This has changed slightly as Ethereum has gained more traction and investment confidence.
Referring to other research reports on potential ETF flows, the report notes: “There have been numerous estimates of ETF flows, some of which we highlight below. Taking the estimates and standardizing them gives an average estimate in the region of $1 billion per month. Standard Chartered has the highest estimate of $2 billion per month, while JPMorgan Stanley has the lowest estimate of $500 million per month.”
ASXN estimates that Ethereum’s monthly trading value is between $800 billion and $1.2 billion. The company notes that “this estimate was calculated by taking the market capitalization-weighted average of monthly Bitcoin flows and scaling it to the market capitalization of Ethereum.” Furthermore, they backed up their estimates with global cryptocurrency trading product data and “are open to a positive surprise given the unique dynamics of Ethereum trading at face value prior to launch and the introduction of the small trust fund.”
ETH Reflectivity
In terms of liquidity, the report notes that Ethereum’s market dynamics are different from Bitcoin’s. While Ethereum’s overall liquidity is slightly lower, the impact of new ETF inflows could be more pronounced due to Ethereum’s lower “offering” — the amount of assets readily available for trading. “Ethereum’s liquidity profile, coupled with its relatively smaller offering compared to Bitcoin, means that inflows into ETFs could have a disproportionately positive impact on its price,” the report states.
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Furthermore, ASXN’s analysis focuses on the inherent reflexivity of the Ethereum market. According to the report, inflows into Ethereum exchange-traded funds could lead to higher Ethereum prices, which in turn could lead to increased activity and investment in the decentralized finance (DeFi) sector and other Ethereum-based applications. This feedback loop supports Ethereum’s token economy, specifically the EIP-1559 mechanism that burns a portion of transaction fees, effectively reducing the total supply of Ethereum over time.
“Ethereum’s market reflexivity goes beyond simple supply and demand dynamics due to its integral role in DeFi and other blockchain-based applications,” ASXN explains, adding, “As the price of Ethereum rises, it could significantly boost the underlying fundamentals of DeFi platforms, driving more investment and creating a self-reinforcing cycle of value appreciation.”
The report concludes with strategic insights for traditional financial institutions (TradFi) considering investing in Ethereum. It argues that the narrative around Ethereum as a multifaceted platform for decentralized applications provides compelling value beyond the “digital gold” narrative typically associated with Bitcoin.
ASXN also speculates on the future potential of an ETH staked ETF, which could attract TradFi players with its yield-generating capabilities. “The potential for an ETH staked ETF could be a game-changer, offering traditional finance a way to engage with crypto assets that not only increase in value, but also generate yield,” the report notes.
At the time of publishing this report, ETH was trading at $3,494.
Featured image created using DALL E, chart from TradingView.com