Ethereum ETF Trading Opens Tomorrow

Bittime - Ethereum exchange-traded funds (ETF) trading will officially open on the US market starting tomorrow after receiving approval from the Securities and Exchange Commission (SEC) last May and signing today. After the huge success of the launch of Bitcoin ETFs in January, many are looking forward to whether Ethereum ETFs will receive a similar reception.

Effect of Ethereum ETF on Ethereum Price

Bitcoin ETFs have attracted huge attention from traditional investors who were previously reluctant to dive into the complex world of crypto. These ETFs allow investors to buy shares that track cryptocurrency prices on traditional stock exchanges. With the arrival of Ethereum ETFs, will we see a huge investment surge and Ethereum prices reach record highs, as some are predicting?

Ethereum ETF Launch: What to Expect?

After the surprise approval of an Ethereum ETF in May, the long-awaited product is set to begin trading on July 23. ETFs are popular investment vehicles that allow investors to purchase shares that track the price of an underlying asset, such as gold, foreign currencies, cryptocurrencies, and technology stocks. This product is traded on the stock exchange. The SEC's approval of an Ethereum ETF shocked both traditional and crypto markets.

However, market experts warn not to be too optimistic. Greg Magadini, director of derivatives at blockchain data provider Amberdata, said that fund flows into Ethereum ETFs may not match expectations. He noted that demand for Ethereum futures ahead of launch was not that high.

"Before the Bitcoin ETF launched, traders were eager to gain exposure to the asset, and the derivatives market was very crowded. That was not the case this time," he added. "Therefore, demand for Ethereum exposure will likely be disappointing compared to Bitcoin."

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Factors Affecting Demand

James Butterfill, head of research at Jersey-based asset manager CoinShares, points to another potential shortcoming: Grayscale. This top crypto asset manager will launch two products: a main ETF and a mini ETF. The primary ETF will be converted from a fund that operates like a closed-end product to an ETF. ETFs, by nature, are easy to liquidate.

Butterfill expects that investors will quickly cash out of Grayscale's flagship ETF when it launches—which is also the case when Grayscale converted its Bitcoin trust into an ETF in January, depressing the asset's price.

"Just as it happened with the Bitcoin closed-end fund that saw outflows when it became an ETF, something similar will likely happen with the Grayscale Ethereum product," he said. "This approval is positive for the digital asset sector as a whole and may ultimately increase market stability and investor confidence."

Market Expectations and the Future of Ethereum

According to a report from algorithmic trading firm Wintermute, demand for Ethereum ETFs may not be as strong as many analysts predict. While the Bitcoin ETF launch managed to raise $13.8 billion in its first 100 days of trading, the Ethereum ETF launch may not have had the same response.

However, Billy Luedtke, CEO and founder of Ethereum-based authentication protocol Intuition, believes that mini trusts could help push Ethereum prices up. “Mini trusts offer investors a way to get into new ETFs without tax obligations, providing a more attractive fee structure for skeptics,” he said. "With reduced barriers to entry, increased investor attraction through better fee structures and tax benefits, and increased awareness, substantial funding flows into Ethereum can be expected."

Patrick Felder, founder and CIO of Prismatic Capital, said that the market is expecting fund flows of around 15-25% of what we are seeing with Bitcoin ETFs. He added that if fund flows are stronger than that, "we will see a big move in Ethereum prices as market expectations adjust."

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Closing

With high anticipation and various influencing factors, the launch of the Ethereum ETF tomorrow is a significant moment for the crypto market. Whether investors will respond with large cash flows or vice versa, time will tell. What is clear is that this agreement opens a new chapter in the world of crypto investment.

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