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Ethereum ETFs Brace for Slow Reception, JPMorgan Expects Modest Inflows of $1 to $3 Billion
According to a Bloomberg report, analysts suggest that the debut recently approved Ethereum ETFs in the US can generate significantly less demand than spot Bitcoin products. Major financial institutions, including BlackRock and Fidelity, await final approval from the Securities and Exchange Commission (SEC) to list the long-awaited Ethereum funds.
However, JPMorgan strategists expect much lower net inflows into Ethereum ETFs than the $15.3 billion that will flow into Bitcoin vehicles this year.
Analysts divided on the potential of Ethereum ETFs
According to relationship, the success of Bitcoin ETFs dating back five months can be attributed to a controversial narrative that presents Bitcoin as digital gold, a concept that Ether lacks. Additionally, Ether funds will not offer staking rewards for maintaining the blockchain, a feature available to those who hold the token directly.
Caroline Bowler, CEO of BTC Markets Pty, points out that ETH does not have the same profile as Bitcoin. Bitcoin’s market value of $1.4 trillion is three times greater than that of Ether. This discrepancy indicates that Ethereum ETFs in the United States may not have a comparable impact.
In a surprising change, the SEC recently signaled its willingness to approve Ethereum spot ETFs, following its earlier acceptance of Bitcoin Funds due to a court reversal in 2023. While this development has boosted Ether’s price, its 109% gains over the past year still lag behind Bitcoin’s 169% surge, including its record high of March.
JPMorgan strategists led by Nikolaos Panigirtzoglou estimate that potential Ether portfolios will attract a “modest” $1 billion to $3 billion in net inflows for the rest of the year.
However, as Eric Balchunas, senior ETF analyst at Bloomberg Intelligence reports, these products may struggle to capture 20% of the current $62.5 billion in Bitcoin ETF assets in the United States.
Despite these reservations, Vetle Lunde, senior research analyst at cryptocurrency specialist K33 Research, remains optimistic and predicts a value of $4 billion net inflows in the first five months for Ethereum ETFs and a significant “supply absorption shock” that could boost the price of ETH.
VanEck bullish on Ethereum
Fund manager VanEck, which aims to launch an Ethereum ETF, sees potential in the popularity of the token’s underlying Ethereum blockchain, particularly for applications in crypto financial services.
Matthew Sigel, head of digital asset research at VanEck, believes that investors will eventually recognize the greater potential for application and innovation within the Ethereum ecosystem compared to Bitcoin.
It is worth noting that the launch of nine new US Bitcoin ETFs on January 11 initially caused a decline The price of Bitcoin, along with outflows from the Grayscale Bitcoin Trust. However, the strength of demand for new ETFs eventually overshadowed these concerns and Bitcoin resumed its upward trajectory.
Likewise, asset manager Grayscale plans to convert its $11 billion Ethereum offering into an ETF, similar to its Bitcoin fund. While redemptions from the Grayscale fund may create selling pressure on ETH, the overall impact on the market remains unclear.
At the time of writing, ET it was trading at $3,830, while Bitcoin continues to approach the record levels of $73,7000 reached in March. Ether is still some distance from its historical peak of $4,866, reached during the 2021 bull run.
Featured image from DALL-E, chart from TradingView.com