KEY POINTS
- JPMorgan analysts are expecting demand for ETH ETFs to only be 'a fraction' compared to that of BTC ETFs
- They said Ether doesn't have Bitcoin's 'first mover advantage' and the staking removal is disadvantageous
- Joseph Lubin has said he doesn't expect spot ETH ETFs to start trading soon
The cryptocurrency community is anticipating the approval of S-1 filings for spot Ether (ETH) exchange-traded funds (ETFs), but some experts are not so optimistic about the crypto investment public's reception of the new funds.
In a note Thursday, analysts from financial services titan JPMorgan said they are expecting a "negative" reaction for spot ETH ETFs once they begin trading, unlike the immediate positive reaction of the market to spot Bitcoin ETFs.
"The initial market reaction to the launch of spot Ethereum ETFs is likely to be negative," the team of analysts led by Nikolaos Panigirtzoglou wrote in their Flows & Liquidity report seen by The Block. They went on to predict that demand for spot ETH ETFs "would be a fraction of that seen for spot Bitcoin."
They explained that among the key reasons for low demand is the fact that Ether, the native cryptocurrency of the Ethereum blockchain, didn't have a "first mover advantage" unlike Bitcoin, the world's largest digital asset by market value.
They also believe that the removal of staking from the U.S. Securities and Exchange Commission (SEC) filings of applying issuers would make the products less attractive to platforms that offer staking yields.
Finally, they projected a "modest" net inflow of $1 billion to $3 billion for the remaining months of the year, should the SEC approve the S-1 filings of issuers sometime soon.
The SEC approved the 19b-4 filings of exchanges last week, marking a significant milestone in the journey of the Ethereum community that has been seeking more attention from the burgeoning crypto sector since Ether was introduced more than a decade ago.
While the ETH community saw the decision as a major step for the asset, the digital currency's price was largely unmoved by news of the ETFs' approval. There could be a chance for Ether's price to climb once the funds start trading, considering how Bitcoin prices soared steadily after the launch of BTC ETFs in January.
Joseph Lubin, a co-founder of Ethereum, said ahead of the SEC's decision that products have become "a giant political issue," and while he did predict that some applications will be approved, he doesn't think spot ETH ETFs will start trading anytime soon.
His sentiments stem from the "silence" of the SEC in the lead-up to the shock approval of the products last week. Meetings with applicants were largely "one-sided," as per reports ahead of the approval. SEC staff reportedly did not provide comments on their concerns and only listened to what applicants had to say.
There's also the matter regarding the status of Ether as a security or a commodity – an issue the SEC has refused to directly clarify.
