Ethereum ETFs are coming. Can they revive tepid crypto markets?

Without showing his hand, SEC Chairman Gary Gensler still gave as bullish a prognosis on Ethereum ETFs as could be expected yesterday, Talking at the Bloomberg Invest conference. Amid his usual icy statements about the crypto sector, including accusing his interviewer of chasing “clicks,” Gensler said the process of working with issuers was “going well.”

Gensler’s rare acquiescence appears to confirm Bloomberg predictions fortune tellers that ETFs could be launched as early as July 2nd. With crypto assets from Coinbase to Bitcoin craters In recent days, could the arrival of an Ethereum ETF reinvigorate the bull market? After all, approval and to throw of Bitcoin ETFs in January served as a catalyst for the current rally.

The short answer is: probably not. Ethereum has always been Bitcoin’s less-loved little brother, even with its innovative capabilities for smart contracts, enhanced transactions, staking, and a host of other advantages. It’s been years since anyone predicted the “inversion” – that fabled day when Ethereum overtakes Bitcoin – with a straight face.

I spoke with Christopher Perkins, president of venture capital firm CoinFund, who told me that one of the main challenges for Ethereum will be branding. Bitcoin is easy. The proto-cryptocurrency has claimed the moniker “digital gold,” which any investor can understand. A baby boomer looking for where to allocate the millions of dollars earned from selling a house he bought in 1970 for $10,000, however, may have a harder time understanding Ethereum’s value proposition. What exactly is a smart contract and why should we care? “Those boomers, with the money, they don’t get involved in things,” Perkins told me.

Even with the hype surrounding the Bitcoin ETF, we are seeing slow adoption as investors become more comfortable with the new asset class. As Perkins said, ETFs offer two main advantages: Regulatory certainty coupled with operational scalability or better user experience. Bitcoin, thanks to its initial commodity designation, was never really in a regulatory gray area, although ETFs have made it easier for people to buy them directly in their brokerage accounts rather than opening a Coinbase or Robinhood account. With Ethereum, however, the approval and launch of ETFs actually creates a security moat that didn’t exist before, especially after months of speculation that the SEC would reject the applications.

Furthermore, an Ethereum ETF that offers yield could be a game changer if the SEC ever approves them. Last year, Perkins led a project to provide a benchmark rate for Ethereum staking yield, which he highlighted is many times higher than Treasury rates when adjusted for inflation. “The ETF will be very important, but it will also be imperfect because it will deprive investors of that income from the beginning,” he said.

So if Ethereum ETFs finally arrive next week or soon after, don’t expect a surge in adoption. But Perkins said to take a long-term view. “This is just another step in integration and reducing regulatory risk,” he said.

Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz

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